SSE plc Half-Year Report to September 2022

16 NOVEMBER 2022

NAVIGATING VOLATILITY TO DELIVER CRITICAL ENERGY INFRASTRUCTURE AND A STRONG PERFORMANCE

· Investing at record levels, far greater than profits, in projects that will enhance energy security while creating green jobs and supporting local communities.

· Reporting adjusted earnings per share of 41.8p, in line with pre-close guidance, reflecting strength of balanced, integrated business model and importance of assets for system security.

· Making strategic progress on SSE’s £12.5bn Net Zero Acceleration Programme, which is the optimal pathway for SSE to deliver long term growth as the UK’s clean energy champion.

· Strong balance sheet with prudent use of debt markets, meaning minimal long-term debt refinancing expected until FY25 and a strong liquidity position for cash collateral requirements.

· In the context of the prevailing volatile, complex and challenging market conditions, SSE’s guidance of adjusted earnings per share for 2022/23 of at least 120p remains unchanged.  Also continue to expect 2022/23 capital investment (including acquisitions) in excess of £2.5bn and leverage well below the target 4.5x net debt to EBITDA ratio.

· Total Recordable Injury Rate reduced to 0.15 from 0.16 in the same period last year.

FINANCIAL SUMMARY (continuing operations)

 AdjustedReported
 Sept 2022Sept 2021% mvmtSept 2022Sept 2021% mvmt
Operating profit / (loss) (£m)716.0376.8+90%(635.1)1,904.4-133%
Profit / (loss) before tax (£m)559.4174.2+221%(511.0)1,686.1-130%
Earnings / (loss) per share (p)41.810.5+298%(39.7)103.6-138%
Investment, capital and acquisitions (£m)1,743.21,042.8+67%1,432.61,056.6+36%
Net Debt and Hybrid Capital (£bn)(10.0)(9.6)+4%(9.1)(8.9)+2%

Alistair Phillips-Davies , Chief Executive, said:

“One year on and despite unprecedented volatility in the operating environment, our Net Zero Acceleration Programme has never been more relevant to society. We are investing around £12.5bn in the five years to March 2026, with further opportunities that could take the total to over £25bn this decade in the UK and Ireland alone. This direct investment primarily in offshore wind, UK electricity networks and flexible thermal will create the technologies to support long-term energy security.

“Over the past six months we have been delivering on our domestic investment programme at pace whilst increasing our pipeline diversity, through exporting our renewables expertise into selected markets overseas where net zero ambitions have also increased. This has been complemented by our Triton acquisition and organic growth potential in networks as they keep pace with increasingly ambitious government policy.

“The strength and optionality of our resilient mix of market-based and regulated businesses have shone through in this period, with recent trading conditions highlighting the true value to society of a portfolio that balances intermittent renewables with flexible generation when the system needs it most. Our business model and strategy are delivering for our stakeholders today, whilst creating future long-term societal value.”

STRATEGIC HIGHLIGHTS

· Continuing execution of Net Zero Acceleration Programme , with record levels of capex far greater than profits, across a range of projects and technologies.

· First power achieved at 1,075MW Seagreen offshore wind project with commercial operations now expected in summer 2023, and significant progress on Dogger Bank and Viking projects which are progressing to plan.

· Further RAV growth in Transmission, with cable installation under way, connecting Shetland islands to the mainland ahead of expected energisation in FY24.

· Diversified and enhanced pipeline through acquisition of Southern European onshore wind development platform, adding 2.2GW (secured) and up to 3GW (prospective) onshore wind and solar hybridisation projects. Acquisition provides a platform for building the onshore pipeline over the course of this decade.

· Completion of 1.3GW Triton Power acquisition , in a 50:50 Joint Venture with Equinor, strengthens SSE’s position in hydrogen and carbon capture technologies to support long-term decarbonisation of the UK power system whilst contributing to security of supply and grid stability.

· Energy policy environment continues to evolve with short-term interventions counterbalanced by accelerated longer-term ambition in key markets.

FINANCIAL HIGHLIGHTS

· Adjusted earnings per share of 41.8p, in line with pre-close guidance .

· Reported loss per share of (39.7)p, reflecting a number of exceptional items and certain re-measurements, most notably the negative impact from £(1.5)bn of fair value remeasurements, principally arising on forward commodity contracts.

· Profitability in Renewables negatively affected by pace of project delivery and unfavourable weather , exacerbated by the associated requirement to buy back hedges in a higher-price environment.

· Strong performance in Thermal Energy , with thermal generation and gas storage providing vital flexibility and security of supply to the energy system in a time of crisis.

· Raised £1.7bn in Hybrid Capital, Eurobonds and Private Placements in the period which, together with expected disposal proceeds, mean the Group expects to have minimal long-term debt refinancing requirements until FY25.

· Ample liquidity within SSE’s two pension schemes, with liability-driven investment strategies unaffected by October gilt rates spike and no additional company support required

· Adjusted investment, capital and acquisition expenditure of £1.7bn

· Adjusted net debt and hybrid capital at £10.0bn, in line with pre-close guidance .

INTERIM DIVIDEND IN LINE WITH DIVIDEND PLAN TO 2026

· Interim dividend of 29.0p per share in line with policy (assuming FY23 average RPI of 12.7%).

· Continue to target RPI increase for FY23 followed by rebase to 60p in FY24, with attractive annual growth of at least 5% to FY26 underpinned by strong earnings growth forecasts.

· Scrip uptake capped at 25% on full-year dividends to FY26 as previously announced.

FINANCIAL OUTLOOK FOR 2022/23 AND BEYOND

· Continue to expect adjusted earnings per share for the full year of at least 120p.

· Remain on course to report record FY23 capex in excess of £2.5bn (including acquisitions).

· Expect FY23 leverage to be lower than the target 4.5x net debt/EBITDA ratio.

· Continue to expect adjusted EPS to grow at a CAGR of between 7-10% over the five years to March 2026, from an FY21 baseline of 87.5p.

KEY PERFORMANCE INDICATORS

Key Financial IndicatorsAdjustedReported
(continuing operations)Sept 2022Sept 2021Sept 2022Sept 2021
Operating profit / (loss) by business £m    
 – SSEN Transmission 208.4181.7208.4181.7
 – SSEN Distribution 174.6153.3174.6153.3
 – SSE Renewables22.525.4(29.3)(33.6)
 – SSE Thermal & Gas Storage248.264.8887.5479.5
 – Other businesses62.3(48.4)(1,876.3)1,123.5
Operating profit / (loss) £m716.0376.8(635.1)1,904.4
EBITDA £m1,109.3700.2(224.7)2,247.2
Profit / (loss) before tax £m559.4174.2(511.0)1,686.1
  
Earnings / (loss) per share (EPS) pence41.810.5(39.7)103.6
     
Interim dividend per share (DPS) pence29.025.5  
Investment and capital expenditure £m    
 – SSEN Transmission 270.9291.0270.9291.0
 – SSEN Distribution 175.8171.3222.0201.4
 – SSE Renewables426.3417.5635.4116.0
 – SSE Thermal & Gas Storage95.794.137.858.1
 – Other businesses134.568.9266.5390.1
Acquisition consideration £m640.0
Investment, capital and acquisitions £m1,743.21,042.81,432.61,056.6
Net debt and hybrid capital £m9,988.69,611.49,076.48,877.7
Operational Key Performance IndicatorsSept 2022Sept 2021
Thermal generation – GWh19,1587,812
Renewable generation – GWh (inc. pumped storage and constrained off)3,7252,853
Other generation – GWh23850
Total generation output – all plant – GWh12,92110,715
SSEN Transmission RAV – £m4,5903,875
SSEN Distribution RAV – £m4,5253,862
SSE Total Electricity Networks RAV – £m9,1157,737
Business Energy Electricity Sold – GWh5,8066,161
Business Energy Gas Sold – mtherms6573
Airtricity Electricity Sold – GWh2,6932,485
Airtricity Gas Sold – mtherms6966

Notes: 1HY23 excludes 651GWh of pre-commissioning output from Keadby 2. 2Other generation comprises SSE’s small biomass capability which is managed by SSE Distributed Energy and which generated 30GWh in HY23; and 37GWh HY22 in addition to 8GWh in HY23 and 13GWh in HY22 generated by other SSE Distributed Energy assets.

ESG Key Performance IndicatorsSept 2022March 2022Sept 2021
Carbon emissions (scopes 1&2) MtCO2e6.24
Scope 1 GHG intensity gCO2e/kWh271259292
Total water consumed (million cubic meters)0.8
Total recordable injury rate per 100,000 hours worked0.150.170.16
Total economic contribution – UK/Ireland (£bn/€m)15.8/438
Jobs supported – UK/Ireland (headcount)245,290/1,840
Total taxes paid UK/Ireland (£m/€m)335.3/46.4
Employee retention/turnover rate (%)390.5/9.5
Employee engagement index (%)4848282
    
Average board tenure – years53.93.83.3
Female board members (%)465050
Independent board members (%)6757373
Total number of board members131212

Notes: 1 Direct, indirect and induced Gross Value Added, from PwC analysis. 2 Direct, indirect and induced jobs supported, PwC analysis. 3 Includes voluntary and involuntary turnover, excludes end of fixed term contracts and internal transfers. 4 Results from SSE’s annual employee engagement survey. 5 Non-Executive directors including non-Executive Chair. 6 Excludes non-Executive Chair.

FURTHER INFORMATION

Investor Timetable
Interim ex-dividend date12 January 2023
Record date13 January 2023
Scrip reference pricing days12-18 January 2023
Scrip reference price confirmed and released via RNS19 January 2023
Q3 Trading Statement7 February 2023
Final date for receipt of scrip elections10 February 2023
Interim dividend payment date9 March 2023
Notification of Closed Periodby 31 March 2023
Preliminary results for the year ended 31 March 202324 May 2023
AGM and Q1 Trading Statement20 July 2023
Contact Details
Institutional investors and analystsir@sse.com+ 44 (0)345 0760 530
Shareholder servicesSSE@linkgroup.co.uk+ 44 (0)345 143 4005
Media, Sam Peacock, Glenn Barbermedia@sse.com+ 44 (0)345 0760 530
MHP Communications, Oliver Hughesoliver.hughes@mhpc.com+ 44 (0)7885 224 532
MHP Communications, Simon Hockridgesimon.hockridge@mhpc.com+ 44 (0)7709 496 125

Management presentation webcast and teleconference

SSE will present its interim results for the six months to 30 September 2022 on Wednesday 16 November at 08:30am GMT.

You can join the webcast by visiting www.sse.com and following the links on either the homepage or investor pages; or directly using:

https://edge.media-server.com/mmc/p/ui6sj7uu

This will also be available as a teleconference, for which participants can register to receive a unique pin code and conference call number using:

https://register.vevent.com/register/BId3fb30052edf496899a18ed65f1c18ff

Both facilities will be available to replay.

Online Information

News releases and announcements are made available on SSE’s website at www.sse.com/investors and you can register for RNS news alerts using the following link: sse.com/investors/regulatory-news/regulatory-news-alerts/ . You can also follow the latest news from SSE at www.twitter.com/sse .

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