SSE plc preliminary results for the year to 31 March 2016

  • Adjusted profit before tax fell by 3.3% to £1,513.5m
  • Wholesale operating profit of £442.5m, down 6.6% due to lower wholesale gas prices and challenging operating conditions affecting its production and storage businesses
  • Networks operating profit down 1.1% to £926.6m as part of its new regulatory price control
  • Retail operating profit down 0.4% to £455.2m with profit in household energy supply falling due to milder weather and lower customer numbers
  • Total capital and investment spend £1.6bn with around £6bn to be invested across the four years to 2020
  • Over £45bn contributed to UK economy and over €4bn contributed to Irish economy since 2011

SSE plc has today announced its preliminary results for the year to 31 March 2016 during which adjusted profit before tax fell by 3.3% to £1,513.5m.

The reduction reflects a challenging year for the business with lower gas prices, mild weather and a new regulatory price control marking a reduction in profits in its three business divisions.

Alistair Phillips-Davies, SSE Chief Executive, said although it’s been a challenging year, the political and regulatory climate is beginning to become clearer and said they plan to invest around £5.5bn to £6bn over the next four years to March 2020 to support the much needed transformation of the UK’s electricity and gas infrastructure.

He said:  “The operating environment presented a number of complex issues, including the impact of low wholesale gas prices and intense retail market competition.

“Some of the mist is beginning to clear around the legislative, political and regulatory environment and SSE will continue to invest for the future.

“Today’s announcement of our plan to invest up to £6bn in the next four years will help deliver secure, low carbon and affordable energy for the UK and Ireland’s energy customers and the investment in new energy infrastructure for the decades to come.”

Two thirds of SSE’s future investment is expected to be focused on upgrading and delivering new and upgraded electricity lines alongside continued investment in renewable sources of energy.  SSE will also develop its plans for potential new gas power stations at Keadby in Lincolnshire and Seabank 3 near Bristol following planned reforms to the electricity generation Capacity Market.

At the same time it is taking forward improvements in its Retail business to improve digital channels, customer service and diversify its products.

The firm said these were long term investments which would contribute to the future growth of its balanced range of businesses in the decades ahead.

In the last year SSE’s total capital and investment spend was £1.6bn which included its largest ever capital project developing the Caithness-Moray electricity transmission link.  It has expanded its renewables portfolio with 67 MW of new onshore wind commissioned this year and a further 548 MW in construction, including the Galway Wind Park, Ireland’s largest wind farm. It also purchased a 20% interest in the new Shetland Gas Plant and four Greater Laggan gas fields along with surrounding exploration acreage off the Shetland Islands to provide long term gas assets to maintain the balance of the business.

SSE also announced it would be considering options to crystallise value from its long-term shareholding in SGN Ltd, the gas distribution business.  The company said it would consider the sale of up to one third of its 50% equity stake which would return value to shareholders or invested to create more value should there be the right opportunity.

SSE reports in three segments, reflecting its business structure.  Its Wholesale business which generates and stores electricity and gas saw profits reduce by 6.6% to £442.5m mainly due to the lower wholesale gas prices affecting its gas production business.

As expected, profits in its Networks business, which builds and maintains the pipes and wires that transport electricity and gas, fell slightly by 1.1% to £926.6m as a result of a reduction in revenues under the first year of its new regulatory price control and lower capital expenditure in its gas distribution business.

And in Retail profits were down 0.4% to £455.2m following an expected reduction in business services arm SSE Enterprise, as well as lower profits from household energy supply due to lower customer numbers, milder weather and gas price cuts.  Strong growth in business energy supply, particularly in the industrial and commercial sector, offset lower household profits resulting in an overall increase in operating profit of 8.2% in energy supply as a whole.

In March 2016 SSE cut its prices by 5.3%, its third gas price cut in two years meaning costs for the average customer are now 12% or £78 lower customer than 2013 levels.

SSE also revealed it contributed just under £8.9bn and €805m to the UK and Irish economies respectively in 2015/16, taking the totals for the last five years to over £45bn and over €4bn.

You can see our entire Full-year Results statement here.