SSE announces 2015/16 half-year results
- Adjusted profit before tax increased to £548.8m, up 48.2% on the same period last year
- Company expects to have earned over one third of its full-year profit in the first six months, compared with around one quarter in the same period last year
- Investment and capital expenditure up 11.5% to £757.3m including the largest capital project undertaken by SSE, building the Caithness-Moray transmission link
- Retail operating profit up to £101.5m with Energy Supply returning to profitability compared to a loss for the same period last year
- Small drop in operating profit in Networks, down 1.5% after expected revenue reductions as a result of a new price control
- Wholesale operating profit returned to a more typical level of £159.6m, with higher output of renewable energy
SSE plc has today announced its preliminary results for the six months to 30 September 2015 during which adjusted profit before tax rose by 48.2% to £548.8m.
It said it earned around one quarter of its full-year adjusted profit before tax in the first six months of the last financial year; but that in this financial year, it is more likely to have earned over one third of its full-year adjusted profit before tax in the first six months.
The increase follows a wet and windier summer in Scotland and Ireland with higher renewable energy output, continued cost efficiencies across the Group and an increase in business customers.
Due to the seasonable nature of energy provision SSE focuses on full year profits and manages its business on that basis.
The company revealed investment and capital expenditure was up 11.5% to £757.3m - one and a half times its profit for the same period.
SSE has started work on its largest capital project ever undertaken building the Caithness to Moray transmission link and completed the construction of its section of the Beauly to Denny transmission line. It has also upgraded two gas fired power stations at Keadby and Peterhead to increase their flexibility and has opened its first multi-fuel power station in Yorkshire with planning consent secured for a second one.
Its Wholesale business saw profits restored to £159.6m, similar to the level in 2013, following an exceptionally low performance during the same period last year. High rainfall and wind saw over one third of SSE’s generation output coming from renewables in the last six months.
SSE’s Retail business had a strong performance with Energy Supply, the division that sells gas and electricity to households and businesses, returning to profit after stemming the operating losses reported for the same period last year.
This was driven by an increase in new business customers in an extremely competitive environment, driving down its own costs and lower than average temperatures leading to increased gas consumption.
However SSE said in the six months to 30 September 2015 it made less than £5 profit per dual fuel customer and overall it expects to make less profit in Energy Supply at the end of the financial year than it did in 2014-15.
In SSE’s Networks business operating profits declined by 1.5% to £451.6m which was expected following the new price control and reduced profits from its share in Scotia Gas Networks.
Its Transmission business is the fastest growing in Europe with record investment, including completion of the Beauly-Denny transmission line and the commencement of the Caithness to Moray subsea transmission link.
Alistair Phillips-Davies, Chief Executive of SSE, said:
“We’ve had a solid start to the financial year but half year profits are only half the story. There are many variables in energy and so they should be treated with caution – that’s why we focus on full year results.
“The last six months have seen us invest substantially in the UK’s energy infrastructure – committing one and a half times what we’ve made in profit in the first half of the year. We’ve upgraded our fleet of gas fired power stations, opened our new multi-fuel power plant and completed the Beauly to Denny transmission link and started work on the vital subsea link between Caithness and Moray.
“We’ve seen a return to a more typical level of profit in our Wholesale and Retail businesses however market conditions continue to be challenging in domestic energy supply and we expect these profits to be lower at the end of the year.”
SSE reports in three segments, reflecting its business structure.
Wholesale – operating profit of £159.6m
- Energy Portfolio Management and Electricity Generation operating profit increased from £11.8m to £141.8m, as a result of the 1.1TWh (38%) increase in output of renewable energy to 3.9TWh, reflecting higher rainfall and windier conditions over the six months; market conditions, however, remained challenging for thermal generation;
- Gas Production operating profit is £14.1m compared to £13.3m for the same period last year. Day ahead wholesale gas prices were broadly in line with the same period last year, but lower operating costs contributed to a slight increase in operation profit; and
- Gas Storage continues to face a challenging economic environment, although operating profit did increase slightly, from £1.6m in 2014 to £3.7m, as a result of cost savings.
Networks – operating profit of £451.6m
- Electricity Transmission operating profit rose from £98.9m to £142.4m, reflecting continuing major investment in the asset base, including completion of the construction of the Beauly-Denny transmission line;
- Electricity Distribution operating profit fell from £215.7m to £178.6m, as expected, following the introduction of reduced revenue from the implementation of RIIO-ED1; and
- Gas Distribution - SSE’s share of Scotia Gas Networks’ operating profit fell from £143.8m to £130.6m, reflecting an expected reduction in revenue as a result of sharing previously secured efficiencies with customers.
Retail – operating profit of £101.5m
- Energy Supply has returned to profitability compared with a year ago with an operating profit of £73.8m, compared to a loss of £16.9m for the same period last year, following a better performance in the I&C sector, lower than average temperatures leading to an increase in gas consumption, and lower operating costs. Over the full-year it is expected that SSE will report a decline in profit in Domestic Energy Supply as a result of lower customer numbers and the full year impact of its price cut.
- Energy-related Services operating profit of £11.2m is at a similar level to last year as SSE continues to focus on building scale and increasing customers numbers in its non-energy businesses, particularly Telecoms and Home Services; and
- Enterprise operating profits were £16.5m for the six months to September compared with £42.9m for the same period last year. This reduction mainly reflects strategic business disposals in the previous year.
SSE provides people with an essential service and acknowledges it has a responsibility to reach for higher business standards as a result.
In October 2015, SSE again secured independent accreditation with the Fair Tax Mark, the world’s first process for identifying companies making a genuine effort to be open and transparent about their tax affairs. In complying with the Fair Tax Mark criteria, SSE is providing information that moves its disclosure well beyond the current requirements of UK company law and International Financial Reporting Standards to ensure that it provides probity in its tax affairs.
SSE is also an accredited Living Wage employer in the UK, a commitment which extends to its supply chain. In October 2015, SSE published research, carried out with KPMG, which showed that this commitment will benefit around 800 full time employees of companies supplying services to SSE by 2020.
In November 2015 it was announced that SSE had secured a B performance rating in the CDP Climate Change Report 2015 and had secured a place in the Climate Disclosure Leadership Index.
These steps demonstrate SSE’s commitment to acknowledging the enhanced social, economic and environmental impact of its core business activities. SSE is also committed to being a transparent company, and in line with that it will be the subject of a three-part documentary series scheduled to start on BBC4 on Tuesday 17 November 2015.
For the full preliminary results statement visit sse.com/investors