SSE plc, the Perth-based electricity infrastructure giant, said it swung to a pretax profit of £2.495 billion in the year ended March 31, 2024, from a loss of £205.6 million in the prior year.
Analysts on average had forecast pretax profit of £2.15 billion.
RBC Brewin Dolphin senior investment manager John Moore said SSE is in a “sweet spot” in terms of energy transition and direction of policy as the company makes significant investments and becomes an increasingly important part of the UK’s infrastructure.
SSE is the biggest listed firm run from Scotland, with a stock market value of almost £20 billion.
The company said its revenue fell from £12.5 billion to £10.5 billion.
But it reported adjusted earnings per share of 158.5p “towards the top end of guidance and reflecting the resilience and quality of earnings from balanced business mix despite normalisation of energy markets.”
Adjusted operating profit slipped 4% to £2.43 billion “reflecting lower volatility and energy prices that impacted the performance of the Thermal and Gas Storage business.”
SSE said this was partially offset by higher Renewables volumes as the business benefited from capacity additions including Seagreen offshore wind farm reaching full operations.
In electricity networks, the Transmission business benefited from an increase in allowed revenues as it ramped up investment while the Distribution business was impacted by the timing of the recovery of inflationary cost increases.
The Perth company will recommend a final dividend of 40p, making the full year dividend 60p per share “in line with growth aligned dividend plan.”
SSE said £1.1 billion of long-term debt was issued in the period including a €750 million eight-year green bond at a fixed coupon of 4% and a further £500 million 20-year green bond at an all-in rate of 5.575%.
The firm reported adjusted net debt and hybrid capital at £9.4 billion “in line with pre-close guidance, with a net debt to EBITDA ratio of 3.0 times, well within a strong investment grade credit rating range.”
The group reported full power at Seagreen, the world’s deepest fixed bottom offshore wind farm; first power at Dogger Bank, the world’s largest wind farm; final commissioning under way on both the Viking onshore wind farm and the Shetland subsea transmission link, connecting the islands to the GB grid for the first time; and construction starting on 500km Eastern Green Link 2 subsea transmission cable, the largest in the UK.
SSE said it added £6 billion to UK GDP, supporting over 50,000 UK jobs, with a further €1 billion contribution to Ireland’s GDP and over 3,000 Irish jobs supported.
SSE CEO Alistair Phillips-Davies said: “This is a strong performance where we have delivered essential energy infrastructure, benefited from the resilience of our business model, and made disciplined investment in our excellent growth opportunities.
“Renewables, flexible power and electricity networks are the building blocks of a cleaner and more secure energy system.
“With world-class assets and capabilities, and enhanced visibility of growth in transmission, SSE is ideally placed to benefit from this structural trend, creating value for shareholders and society.
“Our immediate focus is on delivering our financial and operational growth targets out to 2026/27 and we are on track to do this, converting our premium organic project pipeline into high-quality sustainable earnings.”
REACTION:
Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “SSE managed to electrify investors by delivering full-year profits at the top at the top end of its target.
“The transition to becoming a renewable energy powerhouse has continued at pace, with a large chunk of its £2.5bn worth of investment directed into greener assets last year.
“That figure’s set to jump to over £3.0bn this year as the speed of project completions ramps up. This investment looks achievable, but it’s set to stretch the balance sheet, with net debt levels likely to be pushed up to the lower end of the group’s 3.5-4.0 times cash profits (EBITDA) target.
“While a moderate amount of debt isn’t a bad thing, especially for a business with such reliable revenue, it does add pressure to keep delivering.
“That’s why it was good to see profit in the renewables business jump by nearly 50%, as higher capacity and power prices helped to more than offset increased staff costs as the segment grew.
“Flexible gas-fired plants are still part of the energy mix and complement the renewables assets well given the latter’s somewhat unreliable nature.
“The flexibility that these plants offer is needed for energy security as it turns out the wind doesn’t always blow, even in Scotland.
“Although, profitability from this division wasn’t as impressive as in the prior year due to lower volatility as prices normalised from their peak.”
RBC Brewin Dolphin senior investment manager John Moore: “Unfavourable weather has had a temporary impact and the company still managed to deliver towards the upper end of previous guidance …
“SSE is in a sweet spot in terms of the energy transition and the direction of policy, and the company is making significant investments and becoming an increasingly important part of the UK’s infrastructure.
“At the same time, there is a good balance with shareholder returns, which could make it an attractive option for income-minded investors.”