SSE plc Interim Results for the six months to 30 September 2016

SSE plc today announced its interim results for the six months to 30 September 2016, during which adjusted profit before tax fell by 13.3% to £475.8m, compared to the same period in 2015.

The reduction reflects lower profits in its Wholesale and Retail businesses due to weather, lower customer numbers in very competitive markets and essential energy infrastructure upgrades such as smart meter roll-out costs. Its Network business saw a small increase, due to a continued focus on operational efficiency.

Energy company performance over six months can be variable due to seasonal fluctuations and so SSE focuses on results for the financial year as whole. It today confirmed it expects a return to growth this financial year, 2016/17.

SSE also announced it plans to invest a record £1.85bn of capital expenditure and investment in Great Britain and Ireland in 2016/17 as it continues to develop secure, sustainable and low carbon energy infrastructure for the future.

It confirmed it plans to use the proceeds from the sale of part of its stake in gas distribution company SGN to return value to shareholders, with an on-market share buy-back of around £500m, with around £100m to support investment in a new onshore windfarm at Stronelairg, near Fort Augustus.

Alistair Phillips-Davies, SSE Chief Executive, said despite greater uncertainty in the economy, SSE is investing record sums supporting the modernisation of the UK’s energy infrastructure, including power production, transmission and distribution, and is delivering enhanced services for its customers.

He said: “We are a company that invests and operates our businesses for the long-term and that’s why today we’ve announced plans for our largest ever investment in the UK this year – a record £1.85bn.

“From building the clean, lower carbon generation we need for the future, the new and upgraded wires to transport energy around the country, and new, improved service for energy supply customers, SSE is investing in customers, in jobs, in the business supply chain and in Great Britain and Ireland’s economies at a critical time.

“There is greater competition in energy supply than ever, but SSE continues to deliver for customers, with the lowest number of complaints in the industry, leading service and a growing range of products and services.

“This focus on customers and operational excellence mean SSE is well positioned for the future.”

Two of the largest ever private investments in Scotland are currently in construction: the 588MW 84 turbine Beatrice Offshore Wind Farm, which will power more than 450,000 homes and in which SSE has a 40% stake; and the new Caithness-Moray transmission link, which will strengthen the electricity grid in the North of Scotland. SSE is also building the largest wind farm in Ireland, Galway Wind Park, and will be installing smart meters into millions of customer homes through to 2020.

It will maintain this investment momentum with its total investment and capital expenditure through to 2020 expected to be close to £6bn.

SSE has a balanced range of energy-related businesses and all three reportable business segments contributed adjusted operating profit during the six months to 30 September 2016.

Wholesale

  • Energy Portfolio Management and Electricity Generation: adjusted operating profit decreased by £18.6m, to £123.2m mainly due to a 20.5% decrease in electricity output from renewable sources, partly offset by an improvement in the contribution from SSE’s thermal generation portfolio. For the year as a whole, SSE is still expecting to report an increase in EPM and Electricity generation operating profit and while SSE’s diverse portfolio of assets and contracts provides mitigation the volatile power market conditions we have seen in recent weeks in the GB power market could have ranging impacts
  • Gas Production: adjusted operating profit decreased by £12m to £2.1m reflecting lower gas prices, with some improvement in profitability expected in the second half of the year due to a higher winter gas price
  • Gas Storage: made an adjusted operating loss of (£4.3m) compared to a profit of £3.7m for the same period last year, reflecting the continued challenges in operating conditions.

Networks

  • Electricity Transmission: in line with expectations for 2016/17 outlined in SSE’s FY2015/16 Financial Results, adjusted operating profit decreased by £6.8m to £135.6m reflecting the phasing of capital expenditure and revenue associated with the growing asset base
  • Electricity Distribution: adjusted operating profit rose very slightly, by £2.4m to £181.0m, with the full benefit of previous under-recoveries of revenue still expected to be reflected in the second half of the year
  • Gas Distribution: SSE’s share of SGN’s adjusted operating profit rose by £8.7m to £139.3m, reflecting the profiling of revenue and continued good performance of the business.

Retail

  • Energy Supply: adjusted operating profit overall decreased by £26.7m to £47.1m. While adjusted operating profit from supplying energy to non-domestic customers improved in the period, this was more than offset by the impact on adjusted operating profit of factors in household energy supply - lower customer account numbers in a competitive market, the costs of delivering the smart meter roll-out and rising non-energy costs for electricity customers
  • Energy-related Services: adjusted operating profit fell by £2.6m to £8.6m, as SSE continues to invest in building scale in these businesses
  • Enterprise: adjusted operating profit fell by £11.7m to £4.8m reflecting continued competitive pressures.

View the full Interim Results statement here.

*This news release sets out SSE’s financial performance on its preferred adjusted basis. In preparing its full Interim Results statement, SSE has been mindful of the commentary issued in May 2016 by the Financial Reporting Council on the European Securities and Markets Authority’s Guidelines on Alternative Performance Measures.

*All profit and percentage comparisons are with the same six month period in 2015/16.