SSE PLC: INTERIM RESULTS FOR THE
SIX MONTHS ENDED 30 SEPTEMBER 2023
15 NOVEMBER 2023
CREATING VALUE BY DELIVERING ON CRITICAL INFRASTRUCTURE
· Major progress on flagship projects including first power at Dogger Bank and full power at Seagreen offshore wind farms, and planning and supply chain secured for Eastern Green Link 2 subsea transmission cable.
· Reporting adjusted earnings per share of 37.0p, ahead of pre-close guidance and reflecting the normal seasonal nature of operations that deliver the majority of annual earnings in the second half of SSE’s financial year.
· Maintaining balance sheet strength with 91% of adjusted debt paying a fixed rate and less than £1.5bn long-term debt refinancing required over the next 24 months.
· Focus on safety remains the number one priority for the group, with initiatives put in place as increased construction activity contributes to a Total Recordable Injury Rate of 0.24, an increase from 0.15.
· Reaffirming guidance for full year 2023/24 of more than 150p adjusted earnings per share.
INCREASING VISIBILITY OVER MEDIUM-TERM OUTLOOK
· Delivery, capital discipline and optionality provide greater certainty over Net Zero Acceleration Programme Plus (NZAP Plus) targets for the five years to 2026/27:
· Capital investment expectations upgraded to £20.5bn for the five-year programme reflecting increasing visibility over regulated networks spend and associated supply chain costs, with around 90% of the upweighted investment plan expected to be invested in electricity networks and renewables.
· Continue to target c.5GW net renewables capacity additions over the period and, given the additional clarity over networks investment, now expecting to grow net electricity networks RAV to more than £15bn by 2027 from the previous net target of £12 – 14bn.
· Increased investment provides greater certainty that we will be comfortably within an adjusted EPS CAGR of 13 – 16% over the five-year period, excluding developer profits, with the existing operational assets and committed capex together expected to contribute around 95% of 2026/27 adjusted EPS target.
· Investment plan remains fully funded, supported by strong balance sheet with a continued expectation to stay within or below a 3.5 – 4.0x net debt / EBITDA range across the plan.
· Reiterating commitment to target annual dividend increases of between 5 – 10% to 2026/27, based on an expected 60 pence full year dividend for 2023/24, with retention of the scrip option and dilution from uptake capped at 25%.
Alistair Phillips-Davies, Chief Executive, said:
“Our performance in the first half of 2023/24 demonstrates SSE’s well-balanced business mix and our ability to adapt and create value while maintaining capital discipline in a fast-evolving energy landscape. As visibility of growth options improves, we have upweighted our capex plans to meet the ambitions of the NZAP Plus plan.
“With an enduring broad political consensus behind the need to build the electricity infrastructure required for net zero, a supportive power price outlook, balance sheet strength underpinned by world-class assets and unrivalled optionality across the clean energy value chain, we have increased confidence in our earnings forecasts not only for this year, but out to 2026/27.”
FINANCIAL SUMMARY (continuing operations1)
| Adjusted | Reported | ||||||
| Sep 2023 | Sep 2022 | % mvmt | Sep 2023 | Sep 2022 | % mvmt | ||
| Operating profit / (loss) (£m) | 693.2 | 716.0 | (3%) | 602.3 | (635.1) | 195% | |
| Profit / (loss) before tax (£m) | 565.2 | 559.4 | 1% | 573.3 | (511.0) | 212% | |
| Earnings / (loss) per share (p) | 37.0 | 41.8 | (11%) | 28.3 | (39.7) | 171% | |
| Investment, capital & acquisitions (£m) | 1,054.3 | 1,743.2 | (40%) | 1,320.4 | 1,432.6 | (8%) | |
| Net Debt and Hybrid Capital (£bn)2 | (8.9) | (10.0) | (11%) | (8.1) | (9.1) | (11%) | |
1 Excluded discontinued operation relates to the disposal of the Gas Production business which contributed £35.0m to Reported profit for the period ended 30 September 2022 (30 September 2023: £nil). 2 Reported numbers exclude equity accounted hybrid capital.
STRATEGIC HIGHLIGHTS
· Historic moment for GB energy system as first power achieved by SSE Renewables at Dogger Bank, which will be the world’s largest offshore farm at 3.6GW.
· Critical milestones also reached at 1.1GW Seagreen offshore wind farm where full power achieved and 440MW Viking onshore wind farm where the final turbines have been installed.
· Successful in AR5, the UK’s fifth Contract for Difference auction, with 605MW of onshore wind contracted as well as Ireland’s third RESS process where the 101MW Yellow River onshore wind farm secured a contract.
· Installation of SSEN Transmission’s Shetland HVDC on track for energisation in Summer 2024 whilst approval of need agreed with Ofgem on reinforcements at Orkney, Skye and Argyll.
· Secured supply chain and planning consent for Eastern Green Link 2, a 2GW subsea HVDC which will help unlock renewable resource in Scotland and be delivered in partnership with National Grid.
· First RIIO-ED2 Uncertainty Mechanism funding secured by SSEN Distribution as it makes a strong start to delivering increasing investment under its new price control.
FINANCIAL HIGHLIGHTS
· Adjusted earnings per share of 37.0p, ahead of pre-close guidance reflecting stronger operational performance combined with a lower anticipated effective rate of tax for the full year.
· Reported earnings per share of 28.3p, as a non-cash accounting impairment on Triton Power and a movement on financial guarantee liabilities were only partially offset by a favourable fair value movement on derivatives.
· Greater investment led to increasing profitability in SSEN Transmission, offset by the 25% non-controlling interest divested in November 2022, whilst the timing of cost inflation recovery in SSEN Distribution principally led to lower profitability.
· Profitability in Renewables reflects higher hedged prices combined with lower hedge buybacks required, albeit with unfavourable weather conditions leading to a shortfall against planned output.
· Strong financial performance in SSE Thermal with additional year-on-year capacity from Triton Power and Keadby 2 offering increased flexibility to the market and supporting security of supply.
· Gas Storage recorded seasonal half-year loss due to inventory churn, expected to revert back to profitability of more than £75m for the full financial year as gas is sold over the winter.
· €750m eight-year Green Bond successfully issued in September 2023 at a fixed coupon of 4.0% and nearly three-times oversubscribed. SSE is now the UK’s largest issuer of Green Bonds.
· Adjusted investment, capital and acquisition expenditure of £1.1bn.
· Adjusted net debt and hybrid capital at £8.9bn, broadly unchanged after the first six months of the financial year and in line with pre-close guidance.
INTERIM DIVIDEND IN LINE WITH GROWTH-ENABLING PLAN
· Announced an interim dividend of 20p for payment on 8 March 2024.
· Interim dividend represents a third of the expected full year dividend of 60p per share.
KEY PERFORMANCE INDICATORS
| Key Financial Indicators | Adjusted | Reported | |||
| (continuing operations) | Sep 2023 | Sep 2022 | Sep 2023 | Sep 2022 | |
| Operating profit / (loss) by business £m | |||||
| – SSEN Transmission | 215.6 | 208.4 | 287.3 | 208.4 | |
| – SSEN Distribution | 120.1 | 174.6 | 120.1 | 174.6 | |
| – SSE Renewables | 86.8 | 15.0 | (23.7) | (36.8) | |
| – SSE Thermal & Gas Storage | 226.2 | 248.2 | 143.3 | 887.5 | |
| – Other businesses inc. corporate unallocated | 44.5 | 69.8 | 75.3 | (1,868.8) | |
| Operating profit / (loss) £m | 693.2 | 716.0 | 602.3 | (635.1) | |
| EBITDA £m | 1,109.6 | 1,109.3 | 1,050.2 | (224.7) | |
| Profit / (loss) before tax £m | 565.2 | 559.4 | 573.3 | (511.0) | |
| Earnings / (loss) per share (EPS) pence | 37.0 | 41.8 | 28.3 | (39.7) | |
| Interim dividend per share (DPS) pence | 20.0 | 29.0 | |||
| Investment and capital expenditure £m | |||||
| – SSEN Transmission | 242.6 | 270.9 | 324.8 | 270.9 | |
| – SSEN Distribution | 245.5 | 175.8 | 336.9 | 222.0 | |
| – SSE Renewables | 447.1 | 477.8 | 381.2 | 686.9 | |
| – SSE Thermal & Gas Storage | 38.4 | 95.7 | 20.8 | 37.8 | |
| – Other businesses | 80.7 | 83.0 | 256.7 | 215.0 | |
| Acquisition consideration £m | – | 640.0 | – | – | |
| Investment, capital and acquisitions £m | 1,054.3 | 1,743.2 | 1,320.4 | 1,432.6 | |
| Net debt and hybrid capital £m | 8,943.8 | 9,988.6 | 8,050.6 | 9,076.4 | |
Notes: HY2022/23 segmental numbers above restated to reflect movement of Solar and Battery business to SSE Renewables and Building Energy Management Systems to Business Energy, both previously reported under SSE Enterprise. Excluded discontinued operation relates to the disposal of the Gas Production business which contributed £35.0m to Reported profit for the period ended 30 September 2022 (30 September 2023: £nil).
| Operational Key Performance Indicators | Sep 2023 | Sep 2022 |
| Thermal generation – GWh1 | 7,020 | 9,158 |
| Renewable generation – GWh (inc. pumped storage and constrained off in GB) | 3,723 | 3,725 |
| Distributed Energy – GWh | 49 | 38 |
| Total generation output – all plant – GWh | 10,792 | 12,921 |
| SSEN Transmission RAV – £m2 | 5,289 | 4,590 |
| SSEN Distribution RAV – £m | 5,138 | 4,525 |
| SSE Total Electricity Networks RAV – £m2 | 10,427 | 9,115 |
| Business Energy Electricity Sold – GWh | 5,203 | 5,806 |
| Business Energy Gas Sold – mtherms | 60.8 | 65 |
| Airtricity Electricity Sold – GWh | 3,110 | 2,693 |
| Airtricity Gas Sold – mtherms | 67 | 69 |
1HY2022/23 excludes 651GWh of pre-commissioning output from Keadby 2 which entered commercial operation on 15 March 2023
2Gross of 25% non-controlling interest in SSEN Transmission
| ESG Key Performance Indicators | Sep 2023 | March 2023 | Sep 2022 |
| Carbon emissions (scopes 1&2) MtCO2e | 2.14 (6 months) | 6.52 (12 months) | 3.26 (6 months) |
| Scope 1 GHG intensity gCO2e/kWh | 232 | 254 | 271 |
| Total water consumed (million cubic meters) | – | 1.4 | – |
| Total recordable injury rate per 100,000 hours worked | 0.24 | 0.19 | 0.15 |
| Total economic contribution – UK/Ireland (£bn/€m)1 | – | 6.0/429 | – |
| Jobs supported – UK/Ireland (headcount)2 | – | 39,940/2,430 | – |
| Total taxes paid UK/Ireland (£m/€m) | – | 501.7/53.8 | – |
| Employee retention/turnover rate (%)3 | – | 89.5/10.5 | – |
| Employee engagement index (%)4 | 85 | 84 | 84 |
| Average board tenure – years5 | 3.3 | 4.4 | 3.9 |
| Female board members (%)6 | 42 | 46 | 46 |
| Independent board members (%)6 | 73 | 75 | 75 |
| Total number of board members | 12 | 13 | 13 |
1Direct, 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.