SECURITIES AND EXCHANGE COMMISSIONS
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15a-16 OF
THE SECURITIES EXHCANGE ACT OF 1934
For the month of February 2002
SCOTTISH POWER PLC
(Translation of Registrant's Name Into English)
CORPORATE OFFICE, 1 ATLANTIC QUAY, GLASGOW, G2 8SP
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F ___
---
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes ___ No X
---
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-____.)
FORM 6-K: TABLE OF CONTENTS
1. Press Release of Scottish Power plc, dated January 31, 2002,
announcement of third quarter and nine month financial results ending December
31, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
/s/ Scottish Power plc
-------------------------
(Registrant)
Date February 1, 2002 By: /s/ Alan McCulloch
------------------------ -----------------------
Alan McCulloch
Assistant Company Secretary
Scottish Power plc
2001/02 Nine Month Results including 3/rd/ Quarter to 31 December 2001
Key Points
. Third quarter earnings per share up 37%* year on year
. Improved performance from US Division
. Southern Water refinancing and Thus demerger on schedule
----------------------------------------------------------------------------------------------
Q3 Q3 Nine months Nine months
00/01 01/02 00/01 01/02
----------------------------------------------------------------------------------------------
1,788.5 1,486.9 Turnover ((Pounds)million) 4,569.3 4,776.8
----------------------------------------------------------------------------------------------
252.3 334.5 Operating profit ((Pounds)million)** 697.1 581.5
----------------------------------------------------------------------------------------------
168.9 239.7 Profit before tax ((Pounds)million)** 440.7 299.5
----------------------------------------------------------------------------------------------
- - Exceptionals (pre-tax) ((Pounds)million) (120.7) (120.1)
----------------------------------------------------------------------------------------------
7.71 10.56 Earnings per share (pence)* 19.99 14.11
----------------------------------------------------------------------------------------------
6.51 6.835 Dividends per share (pence) 19.53 20.505
----------------------------------------------------------------------------------------------
* Before goodwill amortisation and exceptional items, prior year restated for
deferred tax
** Before goodwill amortisation and exceptional items
ScottishPower Chief Executive, Ian Russell, said:
"I am pleased to report improved results with third quarter earnings per share
up by some 37% over the same period last year.
The US Division is making good progress with third quarter operating profit
double that of last year. The UK Division has improved customer service but has
seen its profits reduced by the premium sought by British Energy in spite of the
NETA marketplace. The Infrastructure Division continues to focus on cost cutting
to improve its relative cost performance, with Southern Water's operating
efficiency now recognised by OFWAT as the best of all water and wastewater
companies in the UK.
The refinancing of Southern Water and the proposed demerger of Thus are
progressing well. Both of these processes remain on schedule for completion by
the end of the financial year and are further evidence of our success in
refocusing our business as an integrated international energy and networks
company."
FINANCIAL OVERVIEW
All figures below are before the impact of goodwill amortisation and exceptional
items unless otherwise stated. "Nine months" relates to the nine months to 31
December 2001 and "third quarter" relates to the three months to 31 December
2001, unless otherwise stated.
Group turnover for the third quarter fell by (Pounds)302 million to
(Pounds)1,487 million, with the US Division contributing revenues of (Pounds)639
million compared to (Pounds)925 million in the same period last year. The
quarter on quarter fall in revenues is attributable to the reduction in
wholesale power prices and volumes experienced in the western US. Turnover for
the nine months grew by (Pounds)208 million to (Pounds)4,777 million, an
increase of 5% on the same
period last year. The US Division contributed additional revenues of (Pounds)180
million for the nine months, with increased revenues in our unregulated business
and the impact of rate increases in our regulated business. Turnover in the UK
Division for the nine months was (Pounds)56 million ahead of the equivalent
period last year as a result of revenues from the Rye House power station and
growth in gas wholesale and retail activity, offset in part by lower electricity
retail volumes. The Infrastructure Division contributed additional revenues of
(Pounds)26 million for the nine months due to increased sales allowed under the
regulatory contract. Sales by Thus increased by (Pounds)52 million for the nine
months through growth in business services revenues. Turnover for the nine
months also included revenues of (Pounds)132 million from Appliance Retailing, a
reduction of (Pounds)107 million on the equivalent period last year. Appliance
Retailing is now reported as a discontinued operation.
Group operating profit improved by (Pounds)82 million (33%) in the third
quarter, with the US Division contributing additional operating profit of
(Pounds)99 million. The improvement in the US is due to regulatory rate
increases and lower power costs experienced in the third quarter of this year,
in addition to the impact of the Hunter plant outage on the third quarter
results of 2000/01. Group operating profit for the nine months fell by
(Pounds)116 million to (Pounds)582 million, primarily as a result of the $300
million additional excess net power costs in the US recognised in our half year
results. The UK Division's profits were (Pounds)24 million lower in the third
quarter and (Pounds)37 million lower than the first nine months of last year.
This was due to the premium sought by British Energy in spite of the NETA
marketplace, significantly lower wholesale electricity market prices and, for
the nine months, due to the impact of the first quarter NETA system error.
Infrastructure Division profitability increased by (Pounds)4 million for the
nine months and by (Pounds)5 million in the third quarter as cost savings
targets continue to be achieved. Thus continued to reduce its operating losses
by (Pounds)3 million in the quarter and (Pounds)6 million for the nine months.
There were no exceptional items in the third quarter. The exceptional pre-tax
costs of (Pounds)120 million, recognised in the first quarter results, relate to
costs associated with the disposal of and withdrawal from UK Appliance
Retailing. In the equivalent period last year, an exceptional charge of
(Pounds)121 million was recognised in respect of the implementation of the
PacifiCorp Transition Plan.
The net interest charge increased by (Pounds)32 million to (Pounds)283 million
for the nine months as a result of lower US operating profits, the lag in
recovering excess net power costs through the US regulatory process and the
impact of higher UK debt.
Profit before tax for the nine months decreased by (Pounds)141 million to
(Pounds)300 million and the tax charge of (Pounds)64 million represented an
effective tax rate (including deferred tax) of 21.5% on profits before goodwill
amortisation and exceptional items.
Group earnings per share for the quarter were 10.56 pence compared with 7.71
pence for the equivalent period last year, an increase of 2.85 pence (37%), as a
result of an improved third quarter performance from the US Division. Group
earnings per share for
the nine months were 5.88 pence lower at 14.11 pence, as a result of the impact
of lower profits from the UK Division and the additional net power costs
experienced in the US.
Free cash flow for the nine months was (Pounds)268 million, a reduction of
(Pounds)389 million on the same period last year, due to lower US operating
profits for the period and the impact on working capital of the costs of excess
net power in the US. Capital spent in the nine months amounted to (Pounds)848
million compared to (Pounds)725 million for the equivalent period last year. Of
this (Pounds)408 million was invested in the US Division, including (Pounds)177
million invested in new generation assets. A further (Pounds)201 million was
invested in Southern Water and (Pounds)60 million in Thus. Net debt at 31
December 2001 was (Pounds)887 million higher than 31 March 2001 at (Pounds)6,172
million. Gearing (net debt/shareholders' funds) increased to 112%, from 90% at
31 March 2001.
The third quarter dividend of 6.835 pence per share takes dividends for the nine
months to 20.505 pence per share, consistent with our stated aim of 5% annual
increase in dividends to March 2003. The ADS dividend rate is confirmed as
$0.3863 per ADS.
US DIVISION
Management focus:
. maximising recovery of costs through the regulatory process
. reducing commodity price exposure
. achieving the allowed return on equity
. growing an unregulated merchant energy business
Operating profit for the US Division for the third quarter increased by
(Pounds)99 million to (Pounds)178 million, as a result of regulatory rate
increases and reductions in net power costs quarter on quarter, and the impact
of the Hunter plant outage on last year's results. For the nine months, the US
Division's operating profits were (Pounds)199 million, (Pounds)86 million lower
than the equivalent period last year, with the benefit of regulatory rate
increases more than offset by additional excess net power costs and new business
costs relating to the build up to operation of the unregulated PacifiCorp Power
Marketing (PPM) business, and other strategic initiatives such as our Structural
Realignment Proposal, establishing a Regional Transmission Organisation and
increased spend on risk management.
We are actively pursuing recovery of excess net power costs recorded in deferred
accounts. At the end of December 2001, net power costs and associated carrying
charges held in deferred accounts under US GAAP totalled $407 million, including
$95 million to be requested in a Wyoming rate case the company expects to file
in April 2002. Of the deferred amount at the end of the quarter, recovery has
been requested on $278 million plus carrying charges. Deferral applications have
also been filed relating to a Utah coal mine closure and for excess power costs
in Utah.
Since the half year results, we have filed additional rate case requests
totalling $70 million in Oregon, Washington and California. A schedule of
expected hearing dates for these and other regulatory actions are set out in an
appendix to this announcement.
Over the course of the third quarter we took further steps to manage commodity
price volatility and reduce exposure. We have made physical additions to our US
generation portfolio and have entered into transactions which further help shape
our system resource portfolio, including physical hedging products, and
financial temperature-related instruments that reduce resource and price risk on
hot summer days.
We are seeking state approvals to install a 120 MW permanent peaking facility in
Utah designed to meet a portion of the region's peak summer demand. We have also
purchased the regulated output of a 50 MW wind farm in Wyoming that went into
service in November. We are evaluating the results of a comprehensive energy
solicitation proposal that resulted in more than 50 responses from 30
prospective suppliers to meet Utah's energy requirements going forward. As a
further step to mitigate commodity risks, "hydro-electric" hedges are in place
for the next five years to limit volume and price risks related to Pacific
Northwest hydro-electric generation availability. To provide longer-term
solutions to the region's energy needs, we are working with regulators and other
stakeholders to develop an Integrated Resource Plan. This is a comprehensive
modelling and planning effort to identify the least cost and lowest risk plan to
supply PacifiCorp with power over the next 20 to 25 years.
To further mitigate commodity price risk PacifiCorp has requested power cost
adjustment mechanisms in Oregon, Utah, Idaho and California. Under these
mechanisms, if granted by the commissions, all or part of actual power costs
above or below the level in rates will be shared with customers.
We continue to work to ensure that PacifiCorp maximizes its opportunity to earn
its allowed return on equity in all the states in which it operates. This
process, as well as focusing on the continued drive on Transition Plan
efficiencies, involves working with all our commissions to ensure rates reflect
the full cost of the business going forward. Transition Plan progress at the end
of the quarter shows $110 million of underlying transition related savings
delivered since the start of the Plan against an end-of-year goal of $113
million. Manpower reductions are also on track with cumulative workforce
reductions of 639 employees by the end of the third quarter.
In our unregulated business, PPM, we recently signed a 25-year agreement with
Bonneville Power Administration to sell 90 MW of electricity from the Stateline
wind generating plant on the Oregon-Washington border. PPM also signed one of
the largest public utility wind power contracts with Seattle City Light in
Washington state for 50 MW from 1 January 2002 rising to 175 MW in 2004 and has
negotiated several long-term contracts with a range of other customers.
PPM is also continuing to expand its activities with the purchase in January
2002 of a 40% interest in an underground natural gas storage facility and hub
service business. The hub is a major storage facility located 80 miles west of
Edmonton, Alberta and is
connected to the largest pipeline in the province. With the growing reliance
upon natural gas as a fuel source, the demand for gas storage and related
services is expected to increase over the next several years.
UK DIVISION
Management focus:
. maximising the value of generation and supply assets through our
commercial and asset-backed trading activities
. adding new generation at value creating prices
. improving customer service and reducing costs
The UK Division reported an operating profit of (Pounds)24 million for the nine
months, all of which was delivered in the third quarter. The reduction of
(Pounds)37 million for the nine months was due to the premium sought by British
Energy, in spite of the NETA marketplace, for its output from Hunterston and
Torness power stations, pending the resolution of the ongoing dispute regarding
the Nuclear Energy Agreement (due to expire in 2005), the impact of
significantly lower wholesale electricity market prices on generation margins,
and the impact of the NETA system error of (Pounds)10 million reported in the
first quarter. The reduction was partly offset by the positive contribution from
the Rye House power station. The performance in energy supply for the nine
months improved on the equivalent period last year, as a result of margin growth
in both electricity and gas, offset in part by the cost of investment in
customer acquisitions.
With our outlook for wholesale prices in the longer term remaining relatively
low, without resolution of the British Energy dispute, we consider price
competition, experienced in both the wholesale markets and in the supply
customer base, will continue to have a significant impact on the Division's
performance.
Our trading activities continue to perform well under NETA as we make full use
of our flexible plant portfolio of some 5,000 MW capacity. In the nine months to
December 2001, we estimate that ScottishPower earned one of the highest
contributions of all UK generators per Balancing Market Unit in the short-term
Balancing Market.
The supply of power through the Interconnector to Northern Ireland commenced
successfully on 1 January 2002. The Interconnector is owned by Viridian Group
plc. ScottishPower is supplying, under contracts with Viridian and its
subsidiaries, 160 MW of base load. We were also successful in bidding at auction
for additional capacity from April 2002. This will allow us to develop a
position in the Northern Ireland wholesale and supply markets.
Our new 30 MW windfarm at Beinn an Tuirc was commissioned in December 2001,
taking our UK installed wind capacity to 113 MW. Planning applications were
submitted in the third quarter for 25 MW at Ardeer and an application for the
240 MW scheme at Whitelee, near Glasgow was submitted in January 2002.
ScottishPower has projects in Scotland totalling 500 MW in planning or detailed
environmental assessment, with a further 50 MW in joint venture projects in
England & Wales.
We continue to improve services for our 3.5 million energy customers in the UK
and this was recognised in November 2001, when we received an award from J.D.
Power and Associates as the No.1 domestic gas supplier in the UK for customer
satisfaction. We also launched a new web-site for customers - the first in the
UK where domestic and small business customers can generate an instant bill and
pay for their energy on-line.
INFRASTRUCTURE DIVISION
Management focus:
. improving relative cost performance
. outperforming allowed regulatory returns
. releasing capital from Southern Water
The Infrastructure Division reported operating profits of (Pounds)412 million
for the nine months, an increase of (Pounds)4 million on the equivalent period
last year, of which (Pounds)5 million was delivered in the third quarter. Power
Systems' ongoing restructuring programme has delivered financial benefits of
(Pounds)31 million year to date, as a result of reduced operating costs. This
has more than offset the regulatory price reductions in the first six months of
the financial year and a gain on business disposals reported last year. Southern
Water's operating profit fell by (Pounds)12 million to (Pounds)157 million for
the nine months due to costs from new capital obligations and increased
depreciation, partly offset by (Pounds)8 million of cost savings.
Good progress continues to be made in Power Systems on delivery of the
(Pounds)75 million of cash cost savings in the three years to 2002/03 and the
further (Pounds)33 million of target savings by 2003/04 announced at the half
year. As part of these efficiency initiatives our joint venture connections
business with Alfred McAlpine Utility Services Ltd, named Core Utility Solutions
Ltd, is on track to be operational during February 2002.
Levels of efficiency at Southern Water continue to improve and in OFWAT's
report, published in December 2001, Southern Water was confirmed as being the
most efficient company for water service operating efficiency and ranked second
for sewerage service operating efficiency. Southern Water was the only water and
sewerage company given an "A" rating in both water and sewerage operating
efficiency. Operating expenditure during 2000/01 was confirmed as having reduced
by 13%, making a total reduction of 31% in the five year period - over double
the industry average.
The refinancing of Southern Water is on schedule and we anticipate completion by
the end of the financial year. The OFWAT consultation process closed on 25
January 2002. Southern Water is expected to begin marketing the bonds in late
February 2002 with pricing and launch in March 2002.
THUS
In line with expectations, Thus reported operating losses of (Pounds)43 million
for the nine months, an improvement of (Pounds)6 million on the equivalent
period last year. The business bucked the trend in the telecoms sector producing
strong growth in EBITDA, which improved from negative (Pounds)22 million in the
first nine months of the previous financial year to positive (Pounds)5 million
at December 2001.
On 19 December 2001, we announced that Thus had agreed to the terms of an
underwritten (Pounds)90 million third party banking facility; that ScottishPower
had agreed in principle to subscribe for new shares in Thus in return for
repayment of debt; and that, consistent with our strategic focus on energy and
networks, we would consider a demerger of our shareholding in Thus to
ScottishPower shareholders.
This process remains on schedule. On 18 January 2002, Thus announced the terms
of its proposed refinancing (which includes the introduction of a new holding
company, Thus Group, above Thus) and launched an open offer to raise
approximately (Pounds)275 million before expenses. The open offer has been fully
underwritten by ScottishPower, which has conditionally agreed to subscribe for
the entire issue before clawback by Thus' independent shareholders (whose
entitlement equates to some 20.6% of the new ordinary shares in the open offer)
and other subscriptions of shares in connection with the open offer. The
proceeds of the open offer will be used to repay Thus's drawings under the
ScottishPower loan facility.
On 21 January 2002, ScottishPower held an Extraordinary General Meeting at which
its shareholders approved a reduction of the company's share premium account
which will create, on approval of the reduction by the Court, expected in March
2002, sufficient distributable reserves to facilitate payment of a dividend in
specie to demerge Thus.
ScottishPower currently intends to put proposals to its shareholders which will
enable it to effect the proposed demerger. The demerger terms are expected to be
announced on or about 12 February 2002 and an Extraordinary General Meeting of
the company is expected to be convened on or about 11 March 2002 with a view to
obtaining approval for and completing the demerger by the end of the financial
year.
BOARD AND MANAGEMENT CHANGES
Alan Richardson, Executive Director US Division left the company on 31 December
2001. Judi Johansen, CEO PacifiCorp and Terry Hudgens, CEO PacifiCorp Power
Marketing have been appointed to the Executive Team. Judi and Terry both report
directly to Ian Russell, Chief Executive.
Philip J Carroll jnr joined the Board as non-executive director on 15 January
2002. Philip has long experience of the American and international energy and
engineering sectors having spent four years with California based engineering,
construction and services corporation Fluor, and previously 35 years at Shell
Oil where he was President and CEO from 1993 to 1998.
Ken Vowles, Executive Director International, will retire from the Board of
ScottishPower on 31 March 2002. His 40 year career in the power generation
industry was recognised in June 2001 when he was awarded an OBE in the Queen's
birthday honours.
INVESTOR CALENDAR
6 February 2002 Ordinary and American Depositary Shares go ex-dividend for
the 3rd quarter
8 February 2002 Last date for registering transfers to receive 3rd quarter
dividend
1 March 2002* 3rd quarter dividend payable
31 March 2002 End of financial year 2001/02
1 May 2002 Preliminary announcement of results for the financial year
2001/02
8 May 2002 Shares go ex-dividend for the 4th quarter dividend
10 May 2002 Last date for registering transfers to receive 4th quarter
dividend
14 June 2002 4th quarter dividend payable
* Note: Date change from last calendar announcement made at the half year.
For further information:
Colin McSeveny Group Media Relations Manager 0141 636 4515
Andrew Jamieson Head of Investor Relations 0141 636 4527
APPENDIX OF RECENT US RATE FILINGS AND SCHEDULE DATES
General Filings
Since the half year, filings totalling $70.4 million have been requested in
Oregon ($47.2 million), Washington ($7.2 million) and California ($16 million),
including the following:
On 31 December 2001 PacifiCorp filed for a $34.3 million price increase with the
Oregon Public Utility Commission to reset rates to address unresolved power cost
issues from its last general rate case in September. The expected approval date
is 30 June 2002. On 17 January 2002, PacifiCorp filed in Oregon to begin
recovering $12.9 million of implementation costs between 1 April 2001 and 31
December 2001 associated with Oregon's electric restructuring law, Senate Bill
1149. PacifiCorp is seeking a five-year amortisation of these costs.
A $3.5 million rate increase was approved by the Washington Utilities and
Transportation Commission and became effective on 1 January 2002. This increase
is part of a five-year rate plan in effect in the state of Washington. Also in
Washington, PacifiCorp filed for a $3.7 million increase on 15 January 2002 to
recover increased expenditures for energy efficiency programs.
PacifiCorp filed a $16 million general rate case on 21 December 2001 with the
California Public Utility Commission and has asked for a final decision by late
summer 2002. PacifiCorp remains engaged in efforts to sell its California
service territory to Nor-Cal Electric Authority.
Deferral Filings
Total amounts deferred in Utah, Oregon, Wyoming and Idaho are $407 million.
Requested amounts total $278 million, not including amounts yet to be requested
in Wyoming, where approximately $95 million has been recorded to date. In
addition, a further $109 million for excess power costs has been requested in
Utah, as well as $46 million related to mine closure costs in Utah. Specific
rate case updates under deferred requests include the following:
In Utah pending cases include a request to recover over a 12-month period
approximately $104 million in replacement power costs resulting from the Hunter
outage. An interim increase was approved subject to refund on the Hunter costs
until the issue is resolved in hearings with the Utah Public Service Commission.
These are now scheduled for May 2002. In addition, PacifiCorp is seeking
permission to defer $109 million of excess net power costs. A hearing schedule
has not yet been confirmed on this deferral application.
PacifiCorp made a request to the Idaho Public Utilities Commission on 7 January
2002 to recover extraordinary power costs amounting to $38 million through a
temporary 24-month customer surcharge.
The Wyoming Public Service Commission granted PacifiCorp's request of 21
November 2001 to withdraw its application for approval to pass on approximately
$13 million of excess purchased power costs, and instead to include the request
in a general rate case expected to be filed in April 2002. This action allows
the company to consolidate into the general rate case its request for all the
deferred excess net power costs. These costs total approximately $95 million
including the Hunter plant outage-related costs, for which recovery is being
sought.
In Oregon, PacifiCorp has deferred $168 million including carrying charges, net
of costs recovered through amortisation. As part of a stipulation with the OPUC
Staff, PacifiCorp has requested recovery of $136.5 million of this amount.
Hearings are scheduled for February 2002.
Other Filings
PacifiCorp has filed applications in Utah, Wyoming, Oregon, and Idaho for the
deferral and amortisation of the costs associated with the closure of the Trail
Mountain mine in Utah totalling approximately $46 million. The applications are
in various stages of review and approval by regulators.
Cautionary Statement Regarding Forward Looking Statements
Certain statements contained herein are forward-looking statements that are
subject to risks and uncertainties. These include statements concerning our
expectations and other statements that are not historical facts. In particular,
the statements that due to the growing reliance upon natural gas as a fuel
source, the demand for gas storage and related services is expected to increase
over the next several years; that price competition, experienced in both the
wholesale energy markets and in the supply customer base, will continue to have
a significant impact on the UK Energy Division's performance; that
ScottishPower's successful bidding for additional capacity on the Northern
Ireland Interconnector will allow ScottishPower to develop a position in the
Northern Ireland energy wholesale and supply markets; that ScottishPower
anticipates completion of the Southern Water refinancing by the end of the
financial year; that Southern Water is expected to begin marketing bonds in late
February 2002 with pricing and launch in March 2002; that the proceeds of the
Thus offering will be used to repay Thus's drawings under the ScottishPower loan
facility; that ScottishPower expects Court approval of the reduction in share
premium account in March 2002; that ScottishPower intends to put proposals to
its shareholders which will enable it to effect the proposed demerger of Thus;
that the demerger terms of Thus are expected to be announced on or about 12
February 2002 and that an Extraordinary General Meeting of ScottishPower is
expected to be convened on or about 11 March 2002 with a view to obtaining
approval for and completing the demerger by the end of the financial year; that
Ken Vowles will retire from the Board of ScottishPower on 31 March 2002; and
that PacifiCorp expects approval from the Oregon Public Utility Commission to
reset rates on 30 June 2002 are subject to various uncertainties or changes.
ScottishPower undertakes no obligation to revise these forward-looking
statements to reflect events or circumstances after the date hereof. We desire
to qualify these statements for the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995.
Group Profit and Loss Account
for the three months ended 31 December 2001
Three months ended 31 December 2001
Contin- Discon-
-uing -tinued
operat- operat-
-ions -ions Total
2001 2001 2001
Notes (pound)m (pound)m (pound)m
Turnover:
group and share of
joint ventures 1,494.3 1.5 1,495.8
Less: share
of turnover
in joint ventures (8.7) - (8.7)
Less: share
of turnover
in associates (0.2) - (0.2)
------- ------ -------
Group turnover 2 1,485.4 1.5 1,486.9
Cost of sales (945.2) (0.5) (945.7)
------- ------ -------
Gross profit 540.2 1.0 541.2
Transmission and
distribution costs (134.0) - (134.0)
Administrative
expenses
(including goodwill
amortisation) (130.1) (1.5) (131.6)
Other operating income 21.4 - 21.4
Utilisation of Appliance
Retailing disposal provision - 0.5 0.5
------- ------ -------
Operating profit before
goodwill amortisation 334.5 - 334.5
Goodwill amortisation (37.0) - (37.0)
------- ------ -------
Operating profit 2 297.5 - 297.5
------- ------
Share of operating
profit in joint ventures 1.0
-------
298.5
Loss on disposal of and
withdrawal from
Appliance Retailing (120.1)
Less disposal provision
previously recognised 120.1
-------
-
-------
Profit on ordinary activities
before interest 298.5
Net interest and similar charges
-Group (94.2)
-Joint ventures (1.6)
-------
(95.8)
-------
Profit on ordinary activities
before goodwill amortisation
and taxation 239.7
Goodwill amortisation (37.0)
-------
Profit on ordinary activities
before taxation 202.7
Taxation 4 (51.6)
-------
Profit after taxation 151.1
Minority interests 6.3
-------
Profit for the period 157.4
Dividends (126.1)
-------
Profit retained 31.3
-------
Earnings per ordinary share 5 8.55p
Adjusting item
- goodwill amortisation 2.01p
-------
Earnings per ordinary share
before goodwill amortisation 5 10.56p
-------
Diluted earnings per
ordinary share 5 8.53p
Adjusting item
- goodwill amortisation 2.00p
-------
Diluted earnings per
ordinary share
before goodwill
amortisation 5 10.53p
-------
Dividend per
ordinary share 6 6.835p
-------
The Notes on pages x to x form part of these Accounts.
Group Profit and Loss Account
for the three months ended 31 December 2000
Three months ended 31 December 2000
Contin- Discon-
-uing -tinued
operat- operat-
-ions -ions Total
2000 2000 2000
Notes (pound)m (pound)m (pound)m
Turnover:
group and share of
joint ventures
and associates 1,691.9 100.0 1,791.9
Less: share
of turnover
in joint ventures (3.2) - (3.2)
Less: share
of turnover
in associates (0.2) - (0.2)
-------- ------ -------
Group turnover 2 1,688.5 100.0 1,788.5
Cost of sales (1,230.3) (71.4) (1,301.7)
-------- ------ -------
Gross profit 458.2 28.6 486.8
Transmission
and distribution
costs (132.6) - (132.6)
Administrative
expenses
(including goodwill
amortisation) (120.6) (27.0) (147.6)
Other
operating income 13.2 - 13.2
-------- ------ -------
Operating profit
before goodwill
amortisation 250.7 1.6 252.3
Goodwill amortisation (32.5) - (32.5)
-------- ------ -------
Operating profit 2 218.2 1.6 219.8
-------- ------
Share of operating
profit in joint ventures 0.5
Share of operating profit
in associates 0.1
-------
Profit on ordinary
activities before
interest 220.4
Net interest and
similar charges
-Group (83.2)
-Joint ventures (0.8)
-------
(84.0)
-------
Profit on ordinary
activities before
goodwill amortisation
and taxation 168.9
Goodwill amortisation (32.5)
-------
Profit on ordinary
activities before
taxation 136.4
Taxation 4 (33.1)
-------
Profit after taxation 103.3
Minority interests 5.5
-------
Profit for the period 108.8
Dividends (119.5)
-------
Loss retained (10.7)
-------
Earnings per ordinary
share 5 5.94p
Adjusting item
- goodwill amortisation 1.77p
-------
Earnings per ordinary
share before
goodwill
amortisation 5 7.71p
-------
Diluted earnings per
ordinary share 5 5.92p
Adjusting item
- goodwill amortisation 1.77p
-------
Diluted earnings per
ordinary share
before goodwill
amortisation 5 7.69p
-------
Dividend per
ordinary share 6 6.51p
-------
The Notes on pages x to x form part of these Accounts.
Group Profit and Loss Account
for the nine months ended 31 December 2001
Nine months ended 31 December 2001
Exceptional
Total item-
before discontinued
Continuing Discontinued exceptional operations
operations operations item (Note 3)
2001 2001 2001 2001 2001
Notes (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
Turnover: group and share of
joint ventures and associates 4,660.5 132.3 4,792.8 - 4,792.8
Less: share of turnover in joint ventures (15.7) - (15.7) - (15.7)
Less: share of turnover in associates (0.3) - (0.3) - (0.3)
--------- ------- -------- ------ ---------
Group turnover 2 4,644.5 132.3 4,776.8 - 4,776.8
Cost of sales (3,383.2) (100.4) (3,483.6) - (3,483.6)
--------- ------- -------- ------ ---------
Gross profit 1,261.3 31.9 1,293.2 - 1,293.2
Transmission and distribution costs (397.2) - (397.2) - (397.2)
Administrative expenses (including goodwill
amortisation) (427.5) (54.1) (481.6) - (481.6)
Other operating income 42.3 - 42.3 - 42.3
Utilisation of Appliance Retailing disposal
provision - 13.2 13.2 - 13.2
--------- ------- -------- ------ ---------
Operating profit before goodwill amortisation 590.5 (9.0) 581.5 - 581.5
Goodwill amortisation (111.6) - (111.6) - (111.6)
--------- ------- -------- ------ ---------
Operating profit 2 478.9 (9.0) 469.9 - 469.9
--------- -------
Share of operating profit in joint ventures 0.8 - 0.8
-------- ------ ---------
470.7 - 470.7
Loss on disposal of and withdrawal from
Appliance Retailing before goodwill write back - (105.0) (105.0)
Goodwill write back - (15.1) (15.1)
-------- ------ ---------
Loss on disposal of and withdrawal from
Appliance Retailing - (120.1) (120.1)
-------- ------ ---------
Profit on ordinary activities before interest 470.7 (120.1) 350.6
Net interest and similar charges
-Group (277.6) - (277.6)
-Joint ventures (5.2) - (5.2)
-------- ------ ---------
(282.8) - (282.8)
Profit on ordinary activities before
goodwill amortisation and taxation 299.5 (120.1) 179.4
Goodwill amortisation (111.6) - (111.6)
-------- ------ ---------
Profit on ordinary activities before taxation 187.9 (120.1) 67.8
Taxation 4 (64.4) 21.0 (43.4)
-------- ------ ---------
Profit after taxation 123.5 (99.1) 24.4
-------- ------
Minority interests 24.1
---------
Profit for the period 48.5
Dividends (377.4)
---------
Loss retained (328.9)
---------
Earnings per ordinary share 5 2.64p
Adjusting items
-exceptional item 5.39p
-goodwill amortisation 6.08p
---------
Earnings per ordinary share before
exceptional item and goodwill amortisation 5 14.11p
---------
Diluted earnings per ordinary share 5 2.64p
Adjusting items
-exceptional item 5.38p
-goodwill amortisation 6.06p
---------
Diluted earnings per ordinary share
before exceptional item and goodwill
amortisation 5 14.08p
---------
Dividends per ordinary share 6 20.505p
---------
The Notes on pages x to x form part of these Accounts.
Group Profit and Loss Account
for the nine months ended 31 December 2000
Nine months ended 31 December 2000
Exceptional
Total item-
before continuing
Continuing Discontinued exceptional operations
operations operations item (Note 3)
2000 2000 2000 2000 2000
Notes (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
Turnover: group and share of joint
ventures and associates 4,337.4 239.3 4,576.7 - 4,576.7
Less: share of turnover in
joint ventures (7.0) - (7.0) - (7.0)
Less: share of turnover in associates (0.4) - (0.4) - (0.4)
-------- ------ -------- ------ --------
Group turnover 2 4,330.0 239.3 4,569.3 - 4,569.3
Cost of sales (2,978.4) (170.0) (3,148.4) (62.1) (3,210.5)
-------- ------ -------- ------ --------
Gross profit 1,351.6 69.3 1,420.9 (62.1) 1,358.8
Transmission and distribution costs (389.5) - (389.5) (45.1) (434.6)
Administrative expenses (including
goodwill amortisation) (384.4) (76.2) (460.6) (13.5) (474.1)
Other operating income 34.0 0.4 34.4 - 34.4
-------- ------ -------- ------ --------
Operating profit before goodwill amortisation 703.6 (6.5) 697.1 (120.7) 576.4
Goodwill amortisation (91.9) - (91.9) - (91.9)
-------- ------ -------- ------ --------
Operating profit 2 611.7 (6.5) 605.2 (120.7) 484.5
-------- ------
Share of operating loss in joint ventures (5.5) - (5.5)
Share of operating profit in associates 0.1 - 0.1
-------- ------ --------
Profit on ordinary activities before interest 599.8 (120.7) 479.1
Net interest and similar charges
-Group (249.5) - (249.5)
-Joint ventures (1.5) - (1.5)
-------- ------ --------
(251.0) - (251.0)
Profit on ordinary activities before
goodwill amortisation and taxation 440.7 (120.7) 320.0
Goodwill amortisation (91.9) - (91.9)
-------- ------ --------
Profit on ordinary activities before taxation 348.8 (120.7) 228.1
Taxation 4 (94.3) 45.9 (48.4)
-------- ------ --------
Profit after taxation 254.5 (74.8) 179.7
-------- ------
Minority interests 19.4
--------
Profit for the period 199.1
Dividends (357.9)
--------
Loss retained (158.8)
--------
Earnings per ordinary share 5 10.88p
Adjusting items
- exceptional item 4.09p
- goodwill amortisation 5.02p
--------
Earnings per ordinary share before exceptional
item and goodwill amortisation 5 19.99p
--------
Diluted earnings per ordinary share 5 10.84p
Adjusting items
- exceptional item 4.07p
- goodwill amortisation 5.00p
--------
Diluted earnings per ordinary share before
exceptional item and goodwill amortisation 5 19.91p
--------
Dividends per ordinary share 6 19.53p
--------
The Notes on pages x to x form part of these Accounts.
Group Cash Flow Statement
for the nine months ended 31 December 2001
Nine months ended
31 December
2001 2000
(Pounds)m (Pounds)m
Cash inflow from operating activities 600.4 1,018.1
Dividends received from joint ventures 6.3 2.1
Returns on investments and
servicing of finance (263.9) (300.0)
Taxation (75.1) (63.1)
------------------------------------------------------ ------- -------
Free cash flow 267.7 657.1
Capital expenditure and
financial investment (793.6) (768.5)
------------------------------------------------------ ------- -------
Cash flow before acquisitions
and disposals (525.9) (111.4)
Acquisitions and disposals 178.4 714.9
Equity dividends paid (370.7) (351.8)
------------------------------------------------------ ------- -------
Cash (outflow)/inflow before use of
liquid resources and financing (718.2) 251.7
Management of liquid resources (238.8) 21.3
Financing
-Issue of ordinary share capital 12.2 3.8
-Redemption of preferred stock of PacifiCorp (69.5) -
-Increase/(decrease) in debt 1,067.7 (168.3)
------------------------------------------------------ ------- -------
1,010.4 (164.5)
------------------------------------------------------ ------- -------
Increase in cash in period 53.4 108.5
------------------------------------------------------ ------- -------
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 nine months
ended 31 December 2001
Nine months ended
31 December
2001 2000
(Pounds)m (Pounds)m
Increase in cash in period 53.4 108.5
Cash (inflow)/outflow from (increase)/
decrease in debt (1,067.7) 168.3
Cash outflow/(inflow) from movement
in liquid resources 238.8 (21.3)
-------------------------------------------------- -------- --------
Change in net debt resulting
from cash flows (775.5) 255.5
Net funds disposed (51.1) -
Exchange 45.1 (159.1)
Other non-cash movements (105.7) (0.4)
-------------------------------------------------- -------- --------
Movement in net debt in period (887.2) 96.0
Net debt at end of previous period (5,285.1) (4,841.5)
-------------------------------------------------- -------- --------
Net debt at end of period (6,172.3) (4,745.5)
-------------------------------------------------- -------- --------
The Notes on pages x to x form part of these Accounts.
Group Balance Sheet
as at 31 December 2001
31 December 31 December 31 March
2001 2000 2001
Notes (Pounds)m (Pounds)m (Pounds)m
Fixed assets
Intangible assets - goodwill 2,678.0 2,418.8 2,840.8
Tangible assets 12,231.7 11,055.1 11,920.8
Investments
-Investments in joint ventures:
Share of gross assets 111.3 120.3 118.4
Share of gross liabilities (74.8) (87.3) (74.6)
-------- -------- --------
36.5 33.0 43.8
-Investments in associates 5.0 5.5 5.0
-Other investments 245.6 238.8 247.5
-------- -------- --------
287.1 277.3 296.3
-------- -------- --------
15,196.8 13,751.2 15,057.9
-------- -------- --------
Current assets
Stocks 218.7 219.8 215.1
Debtors
- Gross debtors 1,575.6 2,009.1 1,758.2
- Less non-recourse financing (265.5) (282.2) (285.7)
-------- -------- --------
1,310.1 1,726.9 1,472.5
Short-term bank and other deposits 449.7 283.9 230.2
-------- -------- --------
1,978.5 2,230.6 1,917.8
-------- -------- --------
Creditors: amounts falling due
within one year
Loans and other borrowings (924.0) (637.2) (627.9)
Other creditors (1,960.0) (2,366.0) (2,375.9)
-------- -------- --------
(2,884.0) (3,003.2) (3,003.8)
-------- -------- --------
Net current liabilities (905.5) (772.6) (1,086.0)
-------- -------- --------
Total assets less current liabilities 14,291.3 12,978.6 13,971.9
Creditors: amounts falling due after
more than one year
Loans and other borrowings (5,698.0) (4,392.2) (4,887.4)
Provisions for liabilities and charges -------- -------- --------
- Deferred tax (1,637.7) (1,536.3) (1,625.3)
- Other provisions (719.0) (593.3) (778.7)
-------- -------- --------
(2,356.7) (2,129.6) (2,404.0)
Deferred income (546.8) (486.6) (501.5)
-------- -------- --------
Net assets 2 5,689.8 5,970.2 6,179.0
-------- -------- --------
Called up share capital 925.9 924.2 924.5
Share premium 3,750.5 3,737.2 3,739.7
Revaluation reserve 214.6 218.0 217.1
Capital redemption reserve 18.3 18.3 18.3
Merger reserve 406.4 406.4 406.4
Profit and loss account 192.0 381.9 587.2
-------- -------- --------
Equity shareholders' funds 5,507.7 5,686.0 5,893.2
Minority interests (including non-equity) 182.1 284.2 285.8
-------- -------- --------
Capital employed 5,689.8 5,970.2 6,179.0
-------- -------- --------
Net asset value per ordinary share 5 297.1p 307.5p 318.7p
-------- -------- --------
The Notes on pages x to x form part of these Accounts.
Approved by the Board on 31 January 2002 and signed on its behalf by
Charles Miller Smith David Nish
Chairman Finance Director
Notes to the Quarterly Accounts
for the nine months ended 31 December 2001
1 Basis of preparation
(a) These quarterly Accounts have been prepared on the basis of accounting
policies consistent with those set out in the Directors' Report and Accounts for
the year ended 31 March 2001. As a consequence of the implementation of
Financial Reporting Standard 19 `Deferred tax' (FRS 19) within the March 2001
Accounts the comparative figures for the three months and the nine months to 31
December 2000 have been restated to reflect this change in accounting policy.
(b) The quarterly Accounts are unaudited but have been formally reviewed by the
auditors and their report to the company is set out on page x. The information
shown for the year ended 31 March 2001 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 2001 filed with the
Registrar of Companies. The report of the auditors on these Accounts was
unqualified and did not contain a statement under either Section 237(2) or
Section 237(3) of the Companies Act 1985.
(c) The relevant exchange rates applied in the preparation of these quarterly
Accounts are detailed in Note 10.
2 Segmental information
(a)Turnover by segment
Three months ended 31 December
Total Inter-segment External
turnover turnover turnover
2001 2000 2001 2000 2001 2000
Notes (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
United Kingdom
Generation and Supply (i) 614.1 560.9 9.7 8.3 604.4 552.6
Infrastructure
Power Systems (i) 168.5 165.5 103.2 112.3 65.3 53.2
Southern Water (i) 108.2 106.3 0.2 0.1 108.0 106.2
Thus (ii) 75.3 59.9 6.3 8.0 69.0 51.9
------ ------ ------ ------ ------- -------
United Kingdom total-continuing operations 846.7 763.9
------- -------
United States-continuing operations
PacifiCorp 638.7 924.6 - - 638.7 924.6
------ ------ ------ ------ ------- -------
Total continuing operations 1,485.4 1,688.5
------- -------
United Kingdom-discontinued operations
Appliance Retailing (i) 1.5 101.8 - 1.8 1.5 100.0
------ ------ ------ ------ ------- -------
Total (iii) 1,486.9 1,788.5
------- -------
Nine months ended 31 December
Total Inter-segment External
turnover turnover turnover
2001 2000 2001 2000 2001 2000
Notes (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
United Kingdom
Generation and Supply (i) 1,525.4 1,464.4 29.1 24.5 1,496.3 1,439.9
Infrastructure
Power Systems (i) 469.0 484.2 291.5 326.6 177.5 157.6
Southern Water (i) 321.2 314.6 0.7 0.5 320.5 314.1
Thus (ii) 216.1 163.8 22.2 22.0 193.9 141.8
------- ------- ------ ------ ------- -------
United Kingdom total-continuing operations 2,188.2 2,053.4
------- -------
United States-continuing operations PacifiCorp 2,456.3 2,276.6 - - 2,456.3 2,276.6
------- ------- ------ ------ ------- -------
Total continuing operations 4,644.5 4,330.0
------- -------
United Kingdom-discontinued operations
Appliance Retailing (i) 133.9 244.8 1.6 5.5 132.3 239.3
------- ------- ------ ------- ------- -------
Total (iii) 4,776.8 4,569.3
------- -------
2 Segmental information continued
(b) Operating profit by segment
Three months ended 31 December
Before Before
goodwill goodwill
amortis- Goodwill amortis- Goodwill-
ation amortisation ation amortisation
2001 2001 2001 2000 2000 2000
Notes (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
United Kingdom
Generation and Supply (i) 23.1 (1.2) 21.9 47.1 - 47.1
Infrastructure
Power Systems (i) 91.6 - 91.6 78.2 - 78.2
Southern Water (i) 52.2 - 52.2 60.2 - 60.2
Thus (ii) (10.6) (0.6) (11.2) (13.8) (0.6) (14.4)
------ ------ ------ ------ ------ -----
United Kingdom-
total continuing operations 156.3 (1.8) 154.5 171.7 (0.6) 171.1
------ ------ ------ ------ ------ -----
United States-continuing
operations
PacifiCorp 178.2 (35.2) 143.0 79.0 (31.9) 47.1
------ ------ ------ ------ ------ -----
Total
continuing operations 334.5 (37.0) 297.5 250.7 (32.5) 218.2
------ ------ ------ ------ ------ -----
United Kingdom-
discontinued operations
Appliance Retailing (i) - - - 1.6 - 1.6
------ ------ ------ ------ ------ -----
Total 334.5 (37.0) 297.5 252.3 (32.5) 219.8
------ ------ ------ ------ ------ -----
Nine months ended 31 December
Before
goodwill
amortis-
ation
Before and
goodwill Goodwill except- Goodwill- Except-
amortis- amortis- ional amortis- ional
ation ation item ation item
2001 2001 2001 2000 2000 2000 2000
Notes (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
United Kingdom
Generation and Supply (i) 23.5 (3.6) 19.9 60.3 - - 60.3
Infrastructure
Power Systems (i) 254.4 - 254.4 238.9 - - 238.9
Southern Water (i) 157.4 - 157.4 169.3 - - 169.3
Thus (ii) (43.4) (1.8) (45.2) (49.4) (1.8) - (51.2)
------ ------- ------ ------- ----- ------ ------
United Kingdom total-
continuing operations 391.9 (5.4) 386.5 419.1 (1.8) - 417.3
------ ------ ------ ------ ------ ------- ------
United States-continuing operations
PacifiCorp 198.6 (106.2) 92.4 284.5 (90.1) (120.7) 73.7
------ ------ ------ ------ ------ ------- ------
Total
continuing operations 590.5 (111.6) 478.9 703.6 (91.9) (120.7) 491.0
------ ------ ------ ------ ------ ------- ------
United Kingdom-discontinued operations
Appliance Retailing (i) (9.0) - (9.0) (6.5) - - (6.5)
------ ------ ------ ------ ------ ------- ------
Total 581.5 (111.6) 469.9 697.1 (91.9) (120.7) 484.5
------ ------ ------ ------ ------ ------- ------
(c) Net assets by segment
31 December 31 December 31 March
2001 2000 2001
Notes (Pounds)m (Pounds)m (Pounds)m
United Kingdom
Generation and Supply (i),(iv) 806.5 409.1 691.2
Infrastructure
Power Systems (i),(iv) 2,079.7 2,009.8 1,979.0
Southern Water (i),(iv) 2,704.9 2,492.7 2,590.4
Thus (ii),(iv) 493.2 446.1 459.3
-------- -------- --------
United Kingdom total-continuing operations 6,084.3 5,357.7 5,719.9
-------- -------- --------
United States-continuing operations
PacifiCorp 7,772.0 7,279.3 7,778.7
-------- -------- --------
Total continuing operations 13,856.3 12,637.0 13,498.6
-------- -------- --------
United Kingdom-discontinued operations
Appliance Retailing (i),(iv) (4.8) 13.8 55.6
-------- -------- --------
Unallocated net liabilities (iv),(v) (8,161.7) (6,680.6) (7,375.2)
-------- -------- --------
Total 5,689.8 5,970.2 6,179.0
-------- -------- --------
(i) The segmental information has been presented on the same basis as the
interim Accounts for the six months ended 30 September 2001. This is
different from the segments presented in the prior year's quarterly Accounts.
The former Generation Wholesale and Energy Supply segments have been combined
and the former Other segment (other than Appliance Retailing) has been
absorbed into the new UK business segments. Prior year comparatives have been
restated accordingly. The previously reported turnover, operating profit and
net assets of the Other segment have been allocated as follows:
Three months ended Nine months ended 31 December 31 March
31 December 2000 31 December 2000 2000 2001
External Operating External Operating Net Net
turnover profit turnover profit assets assets
(Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
United Kingdom
Generation and Supply 28.5 1.9 45.0 (3.3) 63.1 27.9
Infrastructure
Power Systems 2.4 1.5 10.6 16.5 31.1 2.3
Southern Water 0.3 0.6 0.9 0.4 12.1 1.5
Appliance Retailing 100.0 1.6 239.3 (6.5) 13.8 55.6
------ ---- ----- ----- ----- -----
Other total 131.2 5.6 295.8 7.1 120.1 87.3
------ ---- ----- ----- ----- -----
(ii) The segment previously described as 'Telecoms' has been re-designated
'Thus' as historical data for this segment no longer includes data relating to
other telecoms operations disposed in prior years.
(iii) In the segmental analysis turnover is shown by geographical origin.
Turnover analysed by geographical destination is not materially different.
(iv) As required by the Utilities Act 2000, the group has implemented a new
legal entity structure for certain of its UK businesses to give effect to
business separation. Following the creation of this new legal structure on 1
October 2001, the directors have reviewed the group's segments and concluded
that no changes are required to the business segments disclosed above. However,
they also reviewed the items to be included within each segment's net assets,
particularly in relation to intra-group balances. The net assets by segment
figures above have been presented on this revised basis and comparative figures
have been restated accordingly.
(v) Unallocated net liabilities include net debt, dividends payable, tax
liabilities and investments.
3 Exceptional items
An exceptional charge of (Pounds)120.1 million in the nine months ended 31
December 2001, recognised after operating profit, relates to the loss on
disposal of and withdrawal from the group's Appliance Retailing operations. This
charge includes (Pounds)15.1 million of goodwill previously written off to
reserves. The pre-goodwill loss of (Pounds)105.0 million
comprises asset impairments of (Pounds)54.2 million and provisions for
trading losses and closure costs of (Pounds)50.8 million, of which
(Pounds)36.4 million had been incurred by 31 December 2001.
An exceptional charge of (pounds)120.7 million in the nine months ended 31
December 2000, recognised in arriving at operating profit, related to the
cost of the Transition Plan for PacifiCorp announced on 4 May 2000 and
primarily represents severance and related costs for approximately 1,600
employees.
4 Taxation
The charge for taxation, including deferred tax, for the nine months ended
31 December 2001 reflects the anticipated effective rate for the year ending
31 March 2002 of 21.5% on the profit before goodwill amortisation,
exceptional items and taxation. The charge for taxation for the nine months
ended 31 December 2000 was based on an effective rate of 22.5%.
5 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 Nine months ended
31 December 31 December
2001 2000 2001 2000
Profit for the period
((Pounds)million) 157.4 108.8 48.5 199.1
Basic weighted average
share capital
(number of shares, million) 1,840.8 1,831.3 1,836.6 1,829.6
Diluted weighted average
share capital
(number of shares, million) 1,846.4 1,838.0 1,840.8 1,837.3
------- ------- ------- -------
The difference between the basic and the diluted weighted average share capital
is wholly attributable to outstanding share options and shares held in trust for
the group's Employee Share Ownership Plan.
(b) The calculation of earnings per ordinary share, on a basis which excludes
exceptional items and goodwill amortisation, is based on the following adjusted
earnings:
Three months ended Nine months ended
31 December 31 December
2001 2000 2001 2000
(Pounds)m (Pounds)m (Pounds)m (Pounds)m
Profit for the period 157.4 108.8 48.5 199.1
Adjusting items
- exceptional items
(net of attributable taxation) - - 99.1 74.8
- goodwill amortisation 37.0 32.5 111.6 91.9
------ ------ ------ ------
Adjusted earnings 194.4 141.3 259.2 365.8
------ ------ ------ ------
Adjusted earnings per share has been presented in addition to earnings per share
calculated in accordance with FRS 14 in order that more meaningful comparisons
of financial performance can be made.
(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 periods (after adjusting for the effect of shares held in trust for
the group's Sharesave Schemes and Employee Share Ownership Plan):
31 December 31 December 31 March
2001 2000 2001
Net assets (as adjusted)((Pounds)million) 5,469.9 5,633.3 5,841.9
Number of ordinary shares in issue
at the period end (as adjusted)
(number of shares, million) 1,841.1 1,831.7 1,833.0
------- ------- -------
6 Dividends per ordinary share
The third interim dividend of 6.835 pence per ordinary share is payable on 1
March 2002 to shareholders on the register at 8 February 2002. This dividend,
together with the interim dividends already paid represents total dividends of
20.505 pence per ordinary share for the nine months ended 31 December 2001. In
the previous year, a third interim dividend of 6.51 pence was declared for the
quarter ended 31 December 2000, representing total dividends of 19.53 pence per
ordinary share for the nine months ended 31 December 2000.
7 Statement of total recognised gains and losses
Nine months ended
31 December
2001 2000
(Pounds)m (Pounds)m
Profit for the period 48.5 199.1
Exchange movement on translation of
overseas results and net assets (83.9) 277.7
------ ------
Total recognised gains and losses for the period (35.4) 476.8
------ ------
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 financial period and equity shareholders'
funds are set out in the tables below.
(a) Reconciliation of profit for the financial period to US GAAP:
Nine months ended
31 December
2001 2000
(Pounds)m (Pounds)m
Profit for the financial period
under UK GAAP 48.5 199.1
US GAAP adjustments:
Amortisation of goodwill (17.6) (26.9)
US regulatory assets 72.6 11.1
Pensions (1.8) 66.1
Depreciation on
revaluation uplift 2.5 2.5
Decommissioning and mine
reclamation liabilities (16.8) (23.9)
PacifiCorp Transition Plan costs (21.7) 113.1
FAS 133 adjustment 64.3 -
Other (16.5) (11.7)
------ ------
113.5 329.4
Deferred tax effect of
US GAAP adjustments (30.3) (90.0)
------ ------
Profit for the financial
period under US GAAP before
cumulative adjustment for FAS 133 83.2 239.4
Cumulative adjustment for FAS 133 (61.6) -
------ ------
Profit for the financial period
under US GAAP 21.6 239.4
------ ------
Earnings per share under US GAAP 4.53p 13.08p
------ ------
Diluted earnings per share
under US GAAP 4.52p 13.03p
------ ------
Earnings per share under US GAAP have been calculated before the cumulative
adjustment for FAS 133.
As permitted under UK GAAP, earnings per share have been presented including and
excluding the impact of exceptional items and goodwill amortisation to provide
an additional measure of underlying performance. In accordance with US GAAP,
earnings per share have been presented above based on US GAAP earnings, without
adjustments for the impact of exceptional items and goodwill amortisation. Such
additional measures of underlying performance are not permitted under US GAAP.
The inclusion of exceptional items in the determination of earnings per share in
accordance with US GAAP decreased earnings by (Pounds)96.5 million or 5.25 pence
per share for the nine months ended 31 December 2001. The inclusion of goodwill
amortisation decreased earnings by (Pounds)129.2 million or 7.03 pence per share
for the nine months ended 31 December 2001 and by (Pounds)118.8 million or 6.49
pence per share for the nine months ended 31 December 2000.
(b) Effect on equity shareholders' funds of differences between UK GAAP and US
GAAP:
31 December 31 December 31 March
2001 2000 2001
(Pounds)m (Pounds)m (Pounds)m
Equity shareholders' funds under UK GAAP 5,507.7 5,686.0 5,893.2
US GAAP adjustments:
Goodwill 1,334.8 1,349.9 1,349.9
Business combinations (185.1) 16.6 (188.7)
Amortisation of goodwill (187.4) (163.3) (172.7)
ESOP shares held in trust (37.8) (52.7) (51.1)
US regulatory assets 860.4 390.2 661.2
Pensions 242.7 216.1 245.0
Dividends 126.1 119.5 119.4
Revaluation of fixed assets (229.0) (229.0) (229.0)
Depreciation on revaluation uplift 14.4 11.0 11.9
Decommissioning and mine
reclamation liabilities 64.4 86.6 82.5
PacifiCorp Transition Plan costs 93.4 116.2 117.2
FAS 133 adjustment (243.4) - -
Other (4.0) 0.6 12.1
Deferred tax:
Effect of US GAAP adjustments (287.4) (338.0) (351.0)
Effect of differences in methodology (27.5) (33.0) (37.0)
------- ------- -------
Equity shareholders' funds under US GAAP 7,042.3 7,176.7 7,462.9
------- ------- -------
FAS 133 `Accounting for Derivative Instruments and Hedging Activities' was
effective for the group from 1 April 2001. The statement establishes accounting
and reporting standards that require every derivative instrument be recorded on
the balance sheet as either an asset or liability measured at fair value.
Changes in the derivative's fair value will be recognised concurrently in
earnings unless specific hedge accounting criteria are met.
The effect of adopting FAS 133 on earnings and equity shareholders' funds is
included in the UK GAAP to US GAAP reconciliations as shown above. The total FAS
133 adjustment included within equity shareholders' funds of (Pounds)243.4
million at 31 December 2001 is offset by (Pounds)185.1 million included within
US regulatory assets relating to PacifiCorp's regulated activities which have
been deferred as a regulatory asset under FAS 71 on the basis of applications to
Public Utility Commissions to adopt this accounting treatment.
9 Contingent liabilities
There have been no material changes to the group's contingent liabilities
disclosed in the Annual Report and Accounts 2001.
10 Exchange rates
The exchange rates applied in the preparation of the quarterly Accounts were as
follows:
Nine months ended
31 December
2001 2000
Average rate for quarters ending
30 June $1.42/(Pounds) $1.53/(Pounds)
30 September $1.44/(Pounds) $1.48/(Pounds)
31 December $1.44/(Pounds) $1.45/(Pounds)
------ ------
Closing rate as at 31 December $1.45/(Pounds) $1.48/(Pounds)
------ ------
The closing rate for 31 March 2001 was $1.42/(Pounds).
Independent Review Report to Scottish Power plc
Introduction
We have been instructed by the company to review the financial information set
out on pages x to x. We have read the other information contained in the
quarterly report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors' responsibilities
The quarterly report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the quarterly report in accordance with the
Listing Rules of the Financial Services Authority which require that the
accounting policies and presentation applied to the quarterly figures should be
consistent with those applied in preparing the preceding annual accounts except
where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information.
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 31 December 2001 and for the nine months ended 31 December 2001.
PricewaterhouseCoopers
Chartered Accountants
Glasgow
31 January 2002