SSE blames weather and gas prices for halving six-month profits
Energy giant SSE has warned half-year profits will tumble 50% after suffering the effects of higher gas prices and dry, still and warm weather.
The company said adjusted operating profit for the first five months of the financial year was knocked by about £190 million, most of which was due to higher than expected gas and commodity prices.
It was also impacted by dry, still and warm weather over the period.
“The net result is that SSE currently expects its adjusted operating profit for the six months to September 30 2018 will be around half of that delivered in the same period in 2017,” the energy firm said in a trading statement on Wednesday.
SSE said its wholesale division is expected to show a “significant” drop in adjusted operating profit from energy generation and an adjusted operating loss of around £100 million in its energy portfolio management unit.
While gas production is set to deliver a rise in profit, it will not be enough to offset a loss across the entirety of its wholesale business.
Its retail division is expected to break even for the half year while the networks unit is on course to deliver a mid-single digit rise in adjusted operating profit – in line with SSE’s plan.
Chief executive Alistair Phillips-Davies said: “Lower than expected output of renewable energy and higher than expected gas prices mean that SSE’s financial performance in the first five months has been disappointing and regrettable.”
The SSE boss said that the company was still on a sure footing.
“The underlying quality of SSE’s businesses remains strong, with regulated networks and renewables providing the core of what will be an infrastructure-focused SSE group in the years ahead.
“This year’s £1.7 billion programme of capital investment, mainly in regulated networks and renewables, has continued to go well in recent months.”
He added that he was “very pleased” that the Competition and Market Authority gave the provisional green light to merger plans between Npower and SSE’s retail operations – SSE Energy Services – last month.
The chief executive said it means the firm is “on course to reshape and renew the SSE group by the end of our financial year”.
“Reshaping and renewing the SSE group will support the delivery of our five-year dividend plan in the years ahead,” he added.
Over the full year, the company said SSE Energy Services will take a further hit due to the sector regulator’s planned default tariff cap – assuming it is implemented at the start of January 2019.
It would mean the division’s full-year adjusted operating profit for 2018/19 would be “significantly lower” than expected at the start of the financial year.
However, because it is part of the planned merger with Npower it is likely to be be excluded from its adjusted earnings per share in its full-year results.
The networks business is expected to deliver mid-single digit percentage increase for the full year.
The performance of the wholesale business will depend on a “range of factors” while the Energy Portfolio Management unit is currently set to log an adjusted operating loss of over £300 million.