While energy group SSE (SSE) may have swerved the energy price-freeze as the prospect of a Labour government evaporated earlier this month, its full-year figures show that trading conditions remain challenging. Regulation loomed large with the first-ever auction for electricity generation capacity, the CMA investigation into the energy markets and final proposals from Ofgem on the eight-year price control in electricity distribution. Overall, SSE delivered a mixed bag of results, with its retail business offsetting poor wholesale trading to deliver a significant step-up pre-tax profits.
Management have announced they will close the coal-fired Ferrybridge station with immediate effect, following a review of the group's coal-fired assets. None of Ferrybridge’s capacity came online, after unsuccessful in bidding at last year's capacity auction. The age of the station, as well as beefed-up EU emissions regulation, weighed heavily on the long-term viability of the coal-fired plant.
Wholesale operating profits last year fell a quarter to £474m, primarily due to lower gas prices, which were down by around a third. Meanwhile, operating profits linked to gas production plummeted 72 per cent to £36.6m. Lower average wind speeds and lower coal-fired output (following July's fire at Ferrybridge), drove down total power output by a quarter. The group is increasing its focus on onshore wind development. And its 457MW-capacity Viking wind project on Shetland, which was previously involved with a legal dispute with Sustainable Shetland, is now back in development.
SSE's retail business bumped up overall profits for the group, thanks to a cost efficiency drive and an increase in household electricity and gas tariffs in late-2013. Operating profits for this segment rose by more than a third to £457m, despite losing around half a million customers. However, management expects to see a reduction in its energy supply profits next year following its 4.1 per cent cut in household gas prices, announced earlier this year.
Broker Whitman Howard expected adjusted 2016 EPS of 121.6p prior to these results, up from 124.1p this year.
SSE (SSE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,678p | MARKET VALUE: | £16.7bn | |
| TOUCH: | 1,677-1,679p | 12-MONTH HIGH: | 1,696p | LOW: 1,426p |
| DIVIDEND YIELD: | 5.3% | PE RATIO: | 30 | |
| NET ASSET VALUE: | 612p* | NET DEBT: | 125% | |
| Year to 31 March | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 28.3 | 2.1 | 162.0 | 75.00 |
| 2012 | 31.7 | 0.3 | 21.0 | 80.10 |
| 2013 | 28.3 | 0.6 | 42.0 | 84.20 |
| 2014 (restated) | 30.6 | 0.6 | 33.5 | 86.70 |
| 2015 | 31.7 | 0.7 | 55.3 | 88.40 |
| % change | +3 | +25 | +65 | +2 |
Ex-div: 23 Jul Payment: 18 Sep *Includes intangible assets of £768.4m, or 77p per share | ||||
