OREANDA-NEWS. SSE plc will enter its close period on Thursday 1 October 2015, prior to the publication on Wednesday 11 November of its financial results for the six months to 30 September 2015.

Since the publication of its trading statement on 23 July 2015, SSE has:

  • entered into an agreement with Total E&P UK Limited to acquire a 20% interest in four gas fields and surrounding exploration acreage in the Greater Laggan area and a 20% interest in the new Shetland Gas Plant;
  • noted that the way is now clear for the ‘Project TransmiT’ reforms to Transmission Network Use of System charges to proceed from 1 April 2016;
  • given notice, as issuer, that €500m of hybrid capital securities and ?750m of hybrid capital securities will be redeemed in full on 1 October 2015;
  • decided to build on its position as the best-performing of the 10 largest energy suppliers in responding to complaints by committing to resolve complaints within four weeks or advise customers of their right to contact Ombudsman Service: Energy – which is twice as fast as the industry standard of eight weeks;
  • confirmed that 28,854 shareholders (26%) elected to receive their final dividend for the year to 31 March 2015 in the form of Scrip dividend, resulting in a reduction in final dividend cash funding of ?159.5m;
  • in line with the value programme set out in March 2014, invited non-binding bids for minority stakes in a number of wind farm developments; 
  • issued an eight-year/€700m euro bond, maturing in September 2023, with a coupon of 1.75% and an all-in funding cost when converted back to sterling of 3.19%; 
  • reached a landmark in its managed roll-out of smart meters across Great Britain with the installation of its 100,000th meter; 
  • been named by Citizens Advice in its quarterly Energy Supplier Performance report as the best performing of the largest 18 energy suppliers in Great Britain, with almost 20 times fewer complaints than the worst performing supplier;
  • been advised that 5,720MW of capacity it submitted has so far pre-qualified for the capacity market auction later this year; and remains in discussions with the EMR Delivery Body with the objective of successfully pre-qualifying a further 427MW of capacity; and
  • noted the CMA’s final determination in respect of the RIIO-ED1 price control appeals.  As relevant distribution network licence holders, both of SSE’s distribution networks were named in the appeals.  The result of the appeals will reduce the networks’ combined average annual revenue by ?2m.

Financial outlook

SSE focuses on results for the financial year as a whole because results for six month periods are more variable and more subject to the impact of shorter-term issues.  In the previous financial year, SSE earned around one quarter of its full-year adjusted profit before tax in the first six months; in 2015/16 it is more likely to have earned over one third of its full-year adjusted profit before tax in the first six months.  In the first half of 2014/15, operating profit in Wholesale was exceptionally low and Energy Supply reported an operating loss; in 2015/16 there has been high output of renewable energy, benefiting Wholesale, and relatively good performance in Energy Supply.  SSE continues to manage a wide range of issues across its Wholesale and Retail businesses and, therefore, relatively good performance in these segments in the first six months does not change its outlook for the financial year as a whole.

SSE uses adjusted earnings per share (EPS) to monitor financial performance over the medium term because it defines the amount of profit after tax that has been earned for each ordinary share.  As it has previously acknowledged, the nature of energy provision means that financial results in any single year are always subject to well-known uncertainties; nevertheless, SSE is continuing to target adjusted earnings per share for 2015/16 of at least 115 pence.

SSE is on course to achieve its principal financial objective for 2015/16, which is to deliver an increase in the full-year dividend that will be at least equal to RPI inflation.  It continues to recognise that its dividend cover, based on dividend increases that at least keep pace with RPI inflation, could range from around 1.2 times to around 1.4 times over the three years to 2017/18.  SSE continues to believe that a long-term target for dividend cover of a range around 1.5 times, also based on dividend increases which at least keep pace with inflation, is the right one to aim for.

Gregor Alexander, Finance Director, SSE, said:

“We are satisfied with the start we have made to the financial year, and are pleased to have made good progress in both the investment programme and the operational performance in  each of the businesses.  The priority now is to make sure that the business performs well throughout the autumn and winter, focusing on meeting the needs of Networks, Retail and Enterprise customers in particular, while achieving our key financial goals.”