SSE says profit drop partly due to smart meter rollout costs

SSE has blamed a 13 per cent drop in its profits on the weather, falling customer numbers, and infrastructure upgrades such as smart meter roll-out costs.

The company today (9 November) announced its interim results for the six months to 30 September 2016, during which adjusted profit before tax fell by 13.3 per cent to £475.8 million, compared with the same period in 2015.

The reduction reflects lower profits in its wholesale and retail businesses due to weather, lower customer numbers in very competitive markets and energy infrastructure upgrades such as smart meter roll-out costs.

Meanwhile, its network business saw a small increase in profit, which it put down to a continued focus on operational efficiency.

In the first half of the financial year, SSE’s energy customer accounts fell from 8.21 million to 8.14 million. The company said this represents the smallest net decrease since 2013. During this period SSE has also gained more than 350,000 new customer accounts across both energy supply and energy-related services, it said.

SSE announced a £500 million share buyback program with the majority of proceeds from the sale of its 16.7 per cent equity stake in SGN. The remaining £100 million from the sale will be used to support investment in onshore windfarm, Stronelairg.

The company also revealed plans to invest £1.85 billion of capital expenditure in 2016/17, as it “continues to develop secure, sustainable and low-carbon energy infrastructure”.

SSE chief executive Alistair Phillips-Davies said despite greater uncertainty in the economy, SSE is investing record sums supporting the modernisation of the UK’s energy infrastructure.

He said: “We are a company that invests and operates our businesses for the long-term and that’s why today we’ve announced plans for our largest ever investment in the UK this year – a record £1.85 billion.”

He added: “There is greater competition in energy supply than ever, but SSE continues to deliver for customers, with the lowest number of complaints in the industry, leading service and a growing range of products and services. This focus on customers and operational excellence mean SSE is well positioned for the future.”

Energy company performance over six months can be variable due to seasonal fluctuations, and so SSE said it focuses on results for the financial year as whole. It confirmed it expects a return to growth this financial year 2016/17.

Analysts at Citi said although the results appear “worse than expected” compared with its forecast, the £500 million share buyback was more than its expectation of £200 million.