4th Oct 2023 11:51
(Alliance News) - SSE PLC's interim update on Wednesday was dubbed "underwhelming" by Hargreaves Lansdown, but its diverse portfolio should help it weather headwinds in the year as a whole.
The Perth, Scotland-based energy firm expects to report half-year adjusted earnings per share of at least 30 pence in the six months to September 30, which would be down from 41.8p the year before.
The guidance reflects a weaker-than-expected performance in renewables, due to adverse weather conditions. Output for renewables was around 19% behind SSE's plans.
"Mother nature weighs on performance at SSE. The pivot towards renewable energy is a bold and admirable move for the power utility company but it comes with a hefty dose of risk, since they are not always reliable," said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.
"The gas storage arm, which buys when prices are low and sells when prices are high – effectively benefitting from price volatility, will run at a loss in the first half due to the relatively stable market environment. However, this division should swing back into profit over the full year when the gas is withdrawn," he added.
While it expects the "lower power price environment and more stable market conditions" to continue over the financial year, it still guides for annual adjusted EPS of over 150p, compared to 166p in financial 2023.
This is in light of its "balanced portfolio of assets across electricity networks, renewables, flexible generation and storage", SSE said.
"Flexible thermal assets continue to demonstrate their value in the group's energy system, helping to plug some of the energy shortfalls from renewable assets. It’s also worth keeping in mind that power utilities are seasonal beasts anyway, given the increased demand during the winter months," Chiekrie continued.
SSE said its performance in the key winter months ahead will depend on weather conditions, plant performance and market conditions.
SSE will update on EPS guidance for financial year 2024 ending March 31 later in the year.
"Our primary focus remains on delivery of our five-year plan out to 2027, which is the platform for up to GBP40 billion of investment in net zero over the next decade," said Finance Director Gregor Alexander.
Shares in SSE were up 0.8% at 1,532.50p each in London on Wednesday.
By Elizabeth Winter, Alliance News senior markets reporter
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