Sse Plc · LSE:SSE
Sse — FY2016 Earnings Presentation
35 slides from Sse's earnings presentation, May 2016
Slide 1: SSE Financial Results
SSE Financial Results Full year to 31 March 2016
Slide 2: Richard Gillingwater, Chairman
Richard Gillingwater Chairman 2
Slide 3: The SSE team
The SSE team Will Morris Colin Nicol Richard Gillingwater Alistair Phillips-Davies | Gregor Alexander Brandon Rennet MD, Retail MD, Networks Chairman Chief Executive Finance Director MD, Finance @sse 3
Slide 4: Safety comes first
Safety comes first Total Recordable Injury Rate* 0.4 0.2 0.23 0.23 0 FY15 FY16 Total Recordable Injuries 150 100 118 113 50 0 FY15 FY16 Combined SSE employees and contractors 4 *TRIR – per 100,000 hours worked
Slide 5: Working towards a long-term framework
Working towards a long-term framework Over the last year: − RIIO ED1 framework confirmed − UK energy policy direction clearer − CMA provisional remedies published SSE strongly believes in constructive engagement with policy-makers and regulators 5
Slide 6: Well-laid foundations for future dividend growth
Well-laid foundations for future dividend growth Over the last year SSE: − Delivered financial commitments on EPS and dividend − Taken important steps forward in core operations − Maintained progress in capital investment programme Continuing to target dividend increases of at least RPI inflation in
Slide 7: Gregor Alexander, Finance Director
Gregor Alexander Finance Director ₋ Financial Overview ₋ Networks 7
Slide 8: Focusing on the key financial results
Focusing on the key financial results FY15 £m FY16 £m % change Adjusted profit before tax 1,564.7 1,513.5 -3.3% Fair value re-measurements (IAS 39) (105.3) (14.5) Net exceptional items (674.6) (889.9) Interest on net pension liabilities (IAS 19R) (14.0) (22.3) Tax on JCEs and associates (35.6) 6.4 R
Slide 9: Focusing on the key financial objectives
Focusing on the key financial objectives Dividend (p) Adjusted EPS (p) Dividend Cover 150 150 2 1.5 100 100 124.1 119.5 Return to 1.40x 1.34x 1.2x 89.4 At growth 1 88.4 to least – at 50 50 1.4x RPI least 0.5 120p 0 0 0 FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17-FY19 9
Slide 10: Managing performance across the SSE group
Managing performance across the SSE group Operating profit FY15 £m FY16 £m % change Wholesale 473.8 442.5 -6.6% Networks 936.8 926.6 -1.1% Retail 456.8 455.2 -0.3% Corporate unallocated 14.0 0.1 Total operating profit 1,881.4 1,824.4 -3.0% Exceptional charges PP&E impairments £m Other charges £m Tot
Slide 11: Benefiting from a balanced range of businesses
Benefiting from a balanced range of businesses £1.62bn capex in 2015/16 − Increase in renewable output helps 7% maintain operating profit in EPM and 13% Generation 10% 52% − Ongoing progress of large capital projects leading to higher operating profit in 18% Transmission Networks Renewables Generati
Slide 12: Sustained investment creating value
Sustained investment creating value Investment* (£10.4bn) Operating profit (c.£1.8bn average pa) 15% Reported segments Networks Wholesale 25% 5% 7% 10% Retail Other 22% 44% Business type 47% 44% Networks and Renewables 31% 75% EPM and Thermal Generation 10% 65% Retail and Other *Includes SGN £m 2,00
Slide 13: Recycling capital to support investment
Recycling capital to support investment Sep - 14 Nov - 14 2014 - 2016 April/May - 15 Nov - 15 March - 16 2016/2017 SSE gas PFI street Non-core Langhope PFI street 49.9% in PFI street pipelines lighting businesses: Rig and lighting Clyde wind lighting contracts 1 - Ventures Blue contracts 2 farm cont
Slide 14: Maintaining investment momentum
Maintaining investment momentum c.£6.5bn capex* − £5.5-6.0bn capex* in 4 years to 2020 Disposals − Networks and Renewables to account for c. 67% − FY17 capex forecast c.£1.75bn − FY18 capex forecast c.£1.65bn − £4.3bn of committed capex 14/15 15/16 16/17 17/18 18/19 19/20 £5.5-6.0bn capex* *gross St
Slide 15: Maintaining SSE's financial strength (1)
Maintaining SSE’s financial strength (1) Cash-flow generation* £m 3,000 Hybrid Coupon 2,500 Disposal Intangibles proceeds investment 2,000 Net Operational operating Capex 1,500 cash-flow Cash Dividend 1,000 Growth 500 Capex 0 Increase in Acquis. Adjusted -500 Net Debt -1,000 *Stylised view 15
Slide 16: Maintaining SSE's financial strength (2)
Maintaining SSE’s financial strength (2) FY15 FY16 % change Adjusted net debt and hybrid capital (£m) 7,568 8,395 +10.9% Average interest rate (excl. hybrid capital) 4.21% 3.73% Average interest rate (incl. hybrid capital) 4.55% 3.95% Average debt maturity (excl. hybrid capital) (years) 9.9 8.9 - €7
Slide 17: Maintaining a platform for dividend growth
Maintaining a platform for dividend growth Dividend Per Share FY (p) 89.4 86.7 88.4 84.2 - 2016/17 dividend that at least 80.1 75.0 keeps pace with RPI inflation 70.0 66.0 60.5 - SSE is targeting a return to growth 55.0 in adjusted EPS of at least 120p in 46.5 2016/17 42.5 37.7 35.0 32.4 - Dividend
Slide 18: Networks central to SSE's strategy
Networks central to SSE’s strategy Operating Profit FY15 FY16 % change Electricity Distribution 467.7 370.7 -20.7% Transmission 184.1 287.2 +56.0% Gas Distribution (SGN) 285.0 268.7 -5.7% Networks Operating Profit 936.8 926.6 -1.1% Total Networks RAV, £bn (net) 8 6 4 2 0 FY10 FY11 FY12 FY13 FY14 FY1
Slide 19: Powering communities North and South (1)
Powering communities North and South (1) Distribution RAV (£bn) Operating profit (£m) 4 500 3 400 468 3.16 300 371 2 2.70 200 1 100 0 0 FY11 FY16 FY15 FY16 Distribution capex (£m) 400 300 328 289 308 200 260 258 212 100 0 FY11 FY12 FY13 FY14 FY15 FY16 19
Slide 20: Powering communities North and South (2)
Powering communities North and South (2) Customer Minutes Lost (CML) 80 • Prioritising improvements in customer 60 78 73 73 65 77 67 69 64 60 service 40 57 55 41 • Adoption of ‘restore first, repair second’ 20 method 0 FY11 FY12 FY13 FY14 FY15 FY16 • Continued investment to deliver positive SHEPD SE
Slide 21: Increasing the asset base in Transmission (1)
Increasing the asset base in Transmission (1) Transmission RAV (£bn) Operating Profit (£m) 3 300 287 2 2.29 200 184 1 100 0.52 0 0 FY11 FY16 FY15 FY16 Transmission capex (£m) 600 573 400 467 334 349 200 229 117 0 FY11 FY12 FY13 FY14 FY15 FY16 21
Slide 22: Increasing the asset base in Transmission (2)
Increasing the asset base in Transmission (2) − Caithness-Moray − £350m invested in the year to March 2016 − The largest capital project undertaken by SSE − First revenues have already been received − Transmission RAV to reach £3bn in 2018 − Well placed to build on significant development and constr
Slide 23: Securing value from Gas Distribution
Securing value from Gas Distribution Operating Profit* (£m) SGN RAV* (£bn) 400 3 300 2.51 285 2 269 2.15 200 1 100 0 0 FY15 FY16 FY11 FY16 Investment in SGN 1000 800 600 400 200 0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 RAV growth since Cash returns Equity investment 2005 Robotic technolog
Slide 24: Alistair Phillips-Davies, Chief Executive
Alistair Phillips-Davies Chief Executive ₋ Business and Political Environment ₋ Wholesale ₋ Retail ₋ Outlook 24
Slide 25: Working within the emerging policy and regulatory framework
Working within the emerging policy and regulatory framework Over the last year: − RIIO ED1 framework confirmed − UK energy policy direction clearer − CMA provisional remedies published Energy sector to feature: − Robust economic regulation for Networks − Effective remuneration for generation capacit
Slide 26: Maintaining our commitment to sustainable dividend growth
Maintaining our commitment to sustainable dividend growth £6.5bn capex* - 2016/17 dividend that at least keeps pace with RPI inflation - Dividend cover range from around 1.2x to around 1.4x in the 3 years to March 2019 - SSE is targeting a return to growth in adjusted EPS of at least 120p in 2016/17
Slide 27: Maintaining operating profit in key areas in Wholesale
Maintaining operating profit in key areas in Wholesale Gas- and oil-fired output (TWh) Renewable output (TWh) Operating profit (£m) FY15 FY16 % change 30 10 9.0 9.7 8 8.5 20 21.6 7.6 7.3 6 4 EPM and Generation 433.0 436.3 +0.7% 10 10.1 11.9 4.0 9.8 2 0 0 FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15
Slide 28: Securing further growth in renewable energy
Securing further growth in renewable energy Portfolio of 783MW of wind farms in construction Renewable generation project development • 428MW* of RO-qualifying onshore wind to be Slieve Divena 2 19MW constructed by 2018 • 120MW* of onshore wind in construction in ROI Dunmaglass 94MW • 235MW* Beatric
Slide 29: Contributing to the GB electricity system
Contributing to the GB electricity system “… the volume of capacity procured needs to rise and the clearing price needs to increase.” UK Government, Capacity Market Consultation, March 2016 DECC consultation on Capacity Market confirmed: − Buy more capacity, and buy it earlier − Tighten delivery inc
Slide 30: Demonstrating the benefits of a diverse portfolio
Demonstrating the benefits of a diverse portfolio SSE maintains: • Open and constructive relationship with government • A diverse portfolio of assets, contracts and Fiddler’s Ferry investment options: - Coal – Fiddler’s Ferry - Gas – Keadby 2 - Multi-fuel – Ferrybridge Multifuel 2 Ferrybridge Multif
Slide 31: Maintaining Gas Production assets
Maintaining Gas Production assets 2P reserves* FY15 FY16 Total E&P - bn th 1.73 3.62 Greater Laggan asset acquisition Total E&P - mn boe 28.2 58.8 − Natural complement to existing gas *Estimate as per independent audit production assets E&P gas** production profile (m th) − Shetland Gas Plant 500 −
Slide 32: Managing issues in Energy Supply
Managing issues in Energy Supply Operating profit (£m) FY15 FY16 % change − 30 months of falling household prices − Domestic energy supply margins maintained Energy Supply 368.7 398.9 +8.2% at fair levels Energy Related Services 17.7 15.4 -13.0% − Growth in I&C sector Enterprise 70.4 40.9 -41.9% Und
Slide 33: Transforming SSE's Retail business
Transforming SSE’s Retail business Key initiatives − Optimising smart meter roll-out − Upgrading customer-facing digital channels − Diversifying the products and services Energy Supply and Energy Related Services capex (£m) 200 150 169 100 110 100 50 79 77 0 FY12 FY13 FY14 FY15 FY16 33
Slide 34: Laying foundations for the long term
Laying foundations for the long term This morning SSE has: − Demonstrated ability to deliver − Reaffirmed commitment to dividend growth − Confirmed targeted return to growth in EPS of at least 120p − Extended dividend cover outlook to 2019 − Set out the shape of capex plans to 2020 − Showed continui
Slide 35: Delivering dividend growth for the long term
Delivering dividend growth for the long term Dividend Per Share FY (p) 88.4 89.4 RPI* 86.7 84.2 80.1 75.0 70.0 66.0 60.5 55.0 46.5 42.5 37.7 35.0 32.4 30.0 25.7 27.5 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *forecast, at least RPI 35