SSE plc: Preliminary results for the year to 31 March 2017

Announced Date :  May 17, 2017


This report sets out the preliminary results for SSE plc for the year to 31 March 2017. It includes updates on operations and investments in its Wholesale, Networks and Retail (including Enterprise) businesses.
Overview of 2016/17

Financial highlights for the year to 31 March 2017 are as follows.  Comparisons are with the previous year unless otherwise stated:

·      Recommended full-year dividend up 2.1% to 91.3p;

·      Adjusted earnings per share up 5.2% to 125.7p;

·      Adjusted dividend cover towards top of expected range at 1.38 times;

·      Adjusted operating profit up 2.7% to £1,874.0m;

·      Adjusted profit before tax up 2.1% to £1,545.9m;

·      Adjusted profit after tax up 6.1% to £1,268.9m;

·      Net exceptional charge of £8.2m (net charges of £374.6m offset by £366.4m from the gain on sale of SGN stake and the revaluation of SSE's Clyde wind farm investment);

·      Investment and capital and investment expenditure up 6.6% to £1.7bn;

·      Adjusted net debt and hybrid capital up 1.1% to £8.5bn at 31 March 2017;and

·      On market share buy backs totalling £131m in the period to 31 March 2017, plus an additional £65m in April 2017.

Reported results for 2016/17 are significantly higher than those for 2015/16 due to the impact on reported profit before tax of the significant exceptional charges incurred in 2015/16. These related mainly to the write down of wholesale generation, gas storage and production assets in 2015/16 compared to the gain on sale of a stake in SGN plus lower asset write downs in 2016/17.  This together with the relative movement in mark to market valuations on forward purchase contracts for commodities over both years (which at March 2017 were still 'out of the money') contributed to a net reported gain before tax of £247.5m in 2016/17 compared to a loss before tax on those items of (£904.3m) in 2015/16.

This swing is explained in more detail in the relevant sections throughout this report and is the main driver for:

•              Reported profit before tax increasing to £1,776.6m in 2016/17 compared to a £593.3m in 2015/16, due to the movement in non-recurring exceptional items; and

•              Reported earnings per share increasing  to 158.4p in 2016/17 compared to 46.1p in 2015/16, again due to the movement in non-recurring exceptional items.

Outlook for 2017/18

For the 2017/18 financial year, SSE is:

·      Targeting an annual increase in the full-year dividend that is at least equal to RPI inflation ;

·      Working to keep dividend cover within the expected range of around 1.2- 1.4 times, although it is likely to be towards the bottom of it, as stated in SSE's Notification of Pre Close Statement on 30 March 2017, which also means adjusted earnings per share is likely to be lower than it was in 2016/17; and

·      Expecting to invest around £1.7bn in building, owning and operating assets, with around two thirds of this in electricity networks and renewable energy.

As stated on 30 March, the level of dividend cover is subject to the ongoing factors that influence earnings in SSE's market-based businesses.

Outlook to 2020

Looking further ahead, over the three years to March 2020, SSE is:

·      Targeting delivery of annual dividend increases that at least keep pace with RPI inflation;

·      Working towards achievement of  dividend cover within a range of around 1.2 times to 1.4 times;

·      Focusing on progress in its capital and investment expenditure totalling around £6bn across the four years to 2020, mainly in electricity networks and renewable energy;

·      Targeting an increased RAV of its economically-regulated networks businesses, to close to £9bn;

·      Targeting an increased amount of renewable capacity, including pumped storage, to 4.3GW; and

·      Working to deliver enhanced customers experience of retail energy markets through the installation of smart meters and the provision of digital services.

As stated on 30 March, the level of dividend cover is subject to the ongoing factors that influence earnings in SSE's market-based businesses, and is also subject to material change in sector regulation.

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