REG - SSE Plc - Preliminary results for the year to 31 March 2016 <Origin Href="QuoteRef">SSE.L</Origin> - Part 4
18/05/2016 07:06
- Part 4: For the preceding part double click ID:nRSR5345Yc
7.3 (13.0)
51.7 (71.0)
Other comprehensive gain/(loss), net of taxation 388.0 (184.2)
Total comprehensive income for the period 973.2 480.2
Attributable to:
Ordinary shareholders of the parent 848.6 358.9
Other equity holders 124.6 121.3
973.2 480.2
Consolidated Balance Sheet
as at 31 March 2016
2016 2015
Note £m £m
Assets
Property, plant and equipment 12,525.0 11,303.9
Intangible assets:
Goodwill 609.9 598.0
Other intangible assets 249.5 170.4
Equity investments in associates and joint ventures 1,045.1 875.2
Loans to associates and joint ventures 591.6 559.4
Other investments 16.7 26.4
Deferred tax assets 512.0 270.2
Derivative financial assets 537.7 566.8
Non-current assets 16,087.5 14,370.3
Other intangible assets 500.1 433.5
Inventories 215.4 342.3
Trade and other receivables 3,274.3 4,527.0
Cash and cash equivalents 13 360.2 1,512.3
Derivative financial assets 1,615.0 1,999.9
Current assets held for sale 12 134.2 110.3
Current assets 6,099.2 8,925.3
Total assets 22,186.7 23,295.6
Liabilities
Loans and other borrowings 13 923.3 732.8
Trade and other payables 4,184.4 5,277.1
Current tax liabilities 298.2 308.4
Provisions 94.0 99.5
Derivative financial liabilities 1,783.8 2,297.3
Liabilities held for sale 12 115.0 11.1
Current liabilities 7,398.7 8,726.2
Loans and other borrowings 13 6,245.5 5,367.9
Deferred tax liabilities 917.5 716.0
Trade and other payables 452.4 424.6
Provisions 703.3 382.4
Retirement benefit obligations 17 394.8 664.6
Derivative financial liabilities 857.5 933.4
Non-current liabilities 9,571.0 8,488.9
Total liabilities 16,969.7 17,215.1
Net assets 5,217.0 6,080.5
Equity:
Share capital 15 503.8 496.5
Share premium 880.4 862.7
Capital redemption reserve 22.0 22.0
Hedge reserve (2.2) (72.1)
Translation reserve (17.8) (69.5)
Retained earnings 1,598.6 1,469.8
Equity attributable to ordinary shareholders of the parent 2,984.8 2,709.4
Hybrid capital 14 2,209.7 3,371.1
Total equity attributable to equity holders of the parent 5,194.5 6,080.5
Non-controlling interests 22.5 -
Total equity 5,217.0 6,080.5
The accompanying notes are an integral part of the financial information in this announcement
Consolidated Statement of Changes in Equity
for the year ended 31 March 2016
Share capital Share premium account Capital redemption reserve Hedge reserve Translation reserve Retained earnings Total attributable to ordinary shareholders Hybrid Capital Total equity attributable to equity holders of the parent Non-controlling interests Total equity
£m £m £m £m £m £m £m £m £m £m £m
At 1 April 2015 496.5 862.7 22.0 (72.1) (69.5) 1,469.8 2,709.4 3,371.1 6,080.5 - 6,080.5
Profit for the year - - - - - 460.6 460.6 124.6 585.2 - 585.2
Other comprehensive income - - - 69.0 51.7 187.0 307.7 - 307.7 - 307.7
Share of joint ventures and associates other comprehensive gain - - - 3.9 - 76.4 80.3 - 80.3 - 80.3
Total comprehensive income for the year - - - 72.9 51.7 724.0 848.6 124.6 973.2 - 973.2
Dividends to shareholders - - - - - (884.0) (884.0) - (884.0) - (884.0)
Scrip dividend related share issue 5.9 (5.9) - - - 175.8 175.8 - 175.8 - 175.8
Distributions to hybrid capital holders - - - - - - - (124.6) (124.6) - (124.6)
Issue of shares 1.4 23.6 - - - - 25.0 - 25.0 - 25.0
Redemption of hybrid capital - - - - - (8.5) (8.5) (1,161.4) (1,169.9) - (1,169.9)
Credit in respect of employee share awards - - - - - 13.5 13.5 - 13.5 - 13.5
Investment in own shares - - - - - (11.1) (11.1) - (11.1) - (11.1)
Disposal of non-controlling interest - - - - - 138.6 138.6 138.6 - 138.6
Non controlling interest (i) - - - (3.0) - (19.5) (22.5) - (22.5) 22.5 -
At 31 March 2016 503.8 880.4 22.0 (2.2) (17.8) 1,598.6 2,984.8 2,209.7 5,194.5 22.5 5,217.0
(i) This represents the non controlling interest in Clyde Windfarm (Scotland) Limited
Consolidated Statement of Changes in Equity
for the year ended 31 March 2016
Share capital Share premium account Capital redemption reserve Hedge reserve Translation reserve Retained earnings Total attributable to ordinary shareholders Hybrid Capital Total equity attributable to equity holders of the parent Non-controlling interests Total equity
£m £m £m £m £m £m £m £m £m £m £m
At 1 April 2014 487.4 861.5 22.0 (27.0) 1.5 1,587.3 2,932.7 2,186.8 5,119.5 - 5,119.5
Profit for the year - - - - - 543.1 543.1 121.3 664.4 - 664.4
Other comprehensive income - - - (37.6) (71.0) (66.2) (174.8) - (174.8) - (174.8)
Share of joint ventures and associates other comprehensive (loss) - - - (7.5) - (1.9) (9.4) - (9.4) - (9.4)
Total comprehensive income for the year - - - (45.1) (71.0) 475.0 358.9 121.3 480.2 - 480.2
Dividends to shareholders - - - - - (854.1) (854.1) - (854.1) - (854.1)
Scrip dividend related share issue 8.6 (8.6) - - - 255.6 255.6 - 255.6 255.6
Distributions to hybrid capital holders - - - - - - - (121.3) (121.3) - (121.3)
Issue of shares 0.5 9.8 - - - - 10.3 - 10.3 - 10.3
Redemption of hybrid capital - - - - - - - 1,184.3 1,184.3 - 1,184.3
Credit in respect of employee share awards - - - - - 15.0 15.0 - 15.0 - 15.0
Investment in own shares - - - - - (9.0) (9.0) - (9.0) - (9.0)
At 31 March 2015 496.5 862.7 22.0 (72.1) (69.5) 1,469.8 2,709.4 3,371.1 6,080.5 - 6,080.5
Consolidated Cash Flow Statement
for the year ended 31 March 2016
2016 2015
Note £m £m
Cash generated from operations before working capital movements 11 2,112.1 2,080.7
Decrease/(increase) in inventories 44.0 (8.5)
Decrease/(increase) in receivables 1,098.5 (243.1)
(Decrease)/increase in payables (879.5) 394.0
(Decrease) in provisions (55.7) (66.2)
Cash generated from operations 2,319.4 2,156.9
Dividends received from joint ventures and associates 130.9 110.1
Interest received 101.8 95.9
Interest paid (254.1) (227.8)
Income taxes paid (125.5) (164.8)
Payment for consortium relief (13.6) (12.0)
Net cash from operating activities 2,158.9 1,958.3
Cash flows from Investing activities
Purchase of property, plant and equipment (1,495.4) (1,345.3)
Purchase of other intangible assets (444.8) (241.8)
Deferred income received 16.1 2.9
Proceeds from disposals 12 312.4 233.8
Loans to joint ventures and associates (50.5) (33.9)
Purchase of businesses 12 (669.0) (66.0)
Loans and equity repaid by joint ventures 18.3 15.0
Investment in joint ventures and associates (9.8) (20.0)
Increase in other investments (0.2) (0.1)
Net cash from investing activities (2,322.9) (1,455.4)
Cash flows from financing activities
Proceeds from issue of share capital 25.0 10.3
Dividends paid to company's equity holders 9 (708.2) (598.5)
(Redemption)/issue of hybrid capital 14 (1,161.4) 1,184.3
Hybrid capital dividend payments 14 (124.6) (121.3)
Employee share awards share purchase (11.1) (9.0)
New borrowings 1,070.1 151.1
Repayment of borrowings (77.7) (66.3)
Net cash from financing activities (987.9) 550.6
Net (decrease)/increase in cash and cash equivalents (1,151.9) 1,053.5
Cash and cash equivalents at the start of year 1,512.1 458.6
Net (decrease)/increase in cash and cash equivalents (1,151.9) 1,053.5
Cash and cash equivalents at the end of year 360.2 1,512.1
Cash and cash equivalents in balance sheet 13 360.2 1,512.3
Bank overdrafts (i) - (0.2)
Cash and cash equivalents as above 360.2 1,512.1
(i) Bank overdrafts are reported on the balance sheet as part of current loans and borrowings. For cash flow purposes,
these have been included as cash and cash equivalents.
Notes to the Preliminary Statement
for the year ended 31 March 2016
1. Financial Information
The financial information set out in this announcement does not constitute the Group's consolidated financial statement for
the years ended 31 March 2016 or 2015, but is derived from those accounts. Consolidated financial statements for the year
ended 31 March 2015 were delivered to the Registrar of Companies, and those for the year ended 31 March 2016 will be
delivered in due course. The auditors have reported on those accounts and their reports were (i) unqualified; (ii) did not
include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report;
and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for
2016. This preliminary announcement was authorised by the Board on 17 May 2016.
2. Basis of preparation and presentation
2.1 Basis of preparation
The financial information set out in this announcement has been extracted from the consolidated financial statements of SSE
plc for the year ended 31 March 2016. These consolidated financial statements were prepared under the historical cost
convention, excepting certain assets and liabilities stated at fair value and in accordance with International Financial
Reporting Standards and their interpretations, as adopted by the European Union (adopted IFRS). This consolidated
financial information has been prepared on the basis of accounting policies consistent with those applied in the
consolidated financial statements for the year ended 31 March 2015. The Directors consider that the Group has adequate
resources to continue in operational existence for the foreseeable future. The financial information has therefore been
prepared on a going concern basis. The financial statements are presented in Pounds Sterling.
2.2 Basis of presentation
The Group applies the use of adjusted accounting measures throughout these statements. These measures enable the Directors
to present the underlying performance of the Group and its segments to the users of the statements in a consistent and
meaningful manner. The adjustments applied and certain terms such as 'adjusted operating profit', 'adjusted EPS' and
'adjusted net debt and hybrid capital' are not defined under IFRS and are explained in more detail below.
(i) Adjusted measures
The Directors assess the performance of the Group and its reportable segments based on 'adjusted measures'. These measures
are used for internal performance management and are believed to be appropriate for explaining underlying performance to
users of the accounts. These measures are also deemed the most useful for the ordinary shareholders of the Company and for
other stakeholders.
The performance of the reportable segments is reported based on adjusted profit before interest and tax ('adjusted
operating profit'). This is reconciled to reported profit before interest and tax by adding back exceptional items and
certain re-measurements (see Note 2.2(ii) below) and after the removal of interest and taxation on profits from
equity-accounted joint ventures and associates.
The performance of the Group is reported based on adjusted profit before tax which excludes exceptional items and certain
re-measurements (see below), the net interest costs associated with defined benefit schemes and taxation on profits from
equity-accounted joint ventures and associates. The interest costs removed are non-cash and are subject to variation based
on actuarial valuations of scheme liabilities.
The Group's key performance measure is adjusted earnings per share (EPS), which is based on basic earnings per share before
exceptional items and certain re-measurements (see below), the net interest costs associated with defined benefit schemes
and after the removal of deferred taxation. Adjusted profit after tax is presented on a basis consistent with adjusted EPS
except for the exclusion of payments to holders of hybrid equity.
The financial statements also include an 'adjusted net debt and hybrid capital' measure. This presents financing
information on the basis used for internal liquidity risk management. This measure excludes obligations due under finance
leases, non-recourse debt associated with Clyde Windfarm (Scotland) Limited (see Note 4.2(iv)) and includes cash held as
collateral on commodity trading exchanges. The measure represents the capital owed to investors, lenders and equity holders
other than the ordinary shareholders. As with 'adjusted earnings per share', this measure is considered to be of particular
relevance to the ordinary shareholders of the Group as well as other stakeholders and interested parties.
Notes to the Preliminary Statement
for the year ended 31 March 2016
2. Basis of preparation and presentation (continued)
2.2 Basis of presentation (continued)
(ii) Exceptional items and certain re-measurements
Exceptional items are those charges or credits that are considered unusual by nature and scale and of such significance
that separate disclosure is required for the financial statements to be properly understood. The trigger points for
exceptional items will be tend to be non-recurring although exceptional charges may impact the same asset class or segment
over time. Market conditions that have deteriorated significantly over time will only be captured to the extent observable
at the balance sheet date. Examples of items that may be considered exceptional include material asset or business
impairment charges, business restructuring costs, significant gains or losses on disposal of assets and businesses and
contractual settlements following significant disputes and claims. The Directors consider that any gain or loss on disposal
of greater than £30.0m would be disclosed as being exceptional by nature of its scale. Other gains or losses on disposal
below this level may be considered to be exceptional by reference to specific circumstances which will be explained on a
case-by-case basis.
Certain re-measurements are re-measurements arising on certain commodity, interest rate and currency contracts which are
accounted for as held for trading or as fair value hedges in accordance with the Group's policy for such financial
instruments. This excludes commodity contracts not treated as financial instruments under IAS 39 where held for the Group's
own use requirements which are not recorded until the underlying commodity is delivered.
(iii) Other additional disclosures
As permitted by IAS 1 'Presentation of financial statements', the Group's income statement discloses additional
information in respect of joint ventures and associates, exceptional items and certain re-measurements to aid understanding
of the Group's financial performance and to present results clearly and consistently.
3. Summary of significant new accounting policies and reporting changes
No new accounting standards have been adopted by the Group that have a material impact on the financial statements in the
current year. The following issued standards have not yet been adopted by the Group:
i) IFRS 15 'Revenue from contracts with customers' is effective on 1 January 2018 (and thus to the Group from 1 April
2018), subject to European Union (EU) endorsement;
ii) IFRS 16 'Leases' is effective on 1 January 2019 (1 April 2019 to the Group), subject to EU endorsement;
iii) IFRS 9 'Financial instruments' which will be effective on 1 January 2018 (1 April 2018 to the Group), subject to EU
endorsement.
The Group has commenced initial assessment of the impact of these standards on the consolidated financial statements.
However, at this stage, it is not yet practicable to quantify the impact these standards will have. The assessment of IFRS
15 will consider matters such as bundled goods and services, the allocation of transaction price to performance
obligations, treatment of customer acquisition costs and contracts with variable consideration. The assessment of IFRS 16
will require, with certain exceptions, obligations associated with contracts currently designated as operating leases to be
recognised on balance sheet as lease liabilities. The definition of a lease has also been modified which may impact which
contracts the Group accounts for as leases.
In addition to these, there are a number of other amendments and annual improvement project recommendations that are not
yet effective but which have been endorsed by the EU. These are not anticipated to have a material impact on the Group's
consolidated financial statements. The amendments to IFRS 11 'Accounting for acquisitions of interests in joint
operations' which were effective on 1 January 2016 clarifies that the acquisition of an interest in a joint operation will
be accounted for in accordance with IFRS 3 Business Combinations. This is not expected to represent a change in Group
accounting policy.
4. Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the Group's accounting policies, management necessarily makes judgements and estimates that have
a significant effect on the amounts recognised in the financial statements. Changes in the assumptions underlying the
estimates could result in a significant impact to the financial statements. The Group's key accounting judgement and
estimation areas are noted with the most Significant Financial Judgement areas as specifically discussed by the Audit
Committee being highlighted separately.
4.1 Significant Financial Judgements - Estimation Uncertainties
The preparation of these Financial Statements has specifically considered the following Significant Financial Judgements
all of which are areas of estimation uncertainty.
Notes to the Preliminary Statement
for the year ended 31 March 2016
4 Critical accounting judgements and key sources of estimation uncertainty (continued)
4.1 Significant Financial Judgements - Estimation Uncertainties (continued)
(i) Impairment testing and valuation of certain Non-Current Assets - Estimation Uncertainty
The Group reviews the carrying amounts of its goodwill, other intangible assets and specific property, plant and equipment
assets to determine whether any impairment of the carrying value of those assets requires to be recorded. In conducting its
reviews, the Group makes judgements and estimates in considering the recoverable amount of the respective assets or
cash-generating units (CGUs). The specific assets under review in the year ended 31 March 2016 are goodwill, thermal power
generation assets, wind farm CGUs, gas storage assets and exploration and production (E&P) assets. Changes to the estimates
and assumptions on factors such as regulation and legislation changes, power, gas, carbon and other commodity prices,
volatility of gas prices, plant running regimes and load factors, expected 2P reserves, discount rates and other inputs
could impact the assessed recoverable value of assets and CGUs and consequently impact the Group's income statement and
balance sheet.
(ii) Revenue recognition - estimated energy consumption - Estimation Uncertainty
Revenue from Retail energy supply activities includes an estimate of the value of electricity or gas supplied to customers
between the date of the last meter reading and the year end. This estimation will comprise of values for billed revenue in
relation to consumption from unread meters based on estimated consumption taking account of various factors including usage
patterns and weather trends (disclosed as trade receivables) and for unbilled revenue (disclosed as accrued income). The
volume of unbilled electricity or gas is calculated by assessing a number of factors such as externally notified aggregated
volumes supplied to customers, amounts billed to customers and other adjustments. Unbilled income is calculated by applying
the tariffs relevant to the customer type to the calculated volume of electricity or gas. This estimation methodology is
subject to an internal corroboration process that provides support for the judgements made by management. This process
requires the comparison of calculated unbilled volumes to a benchmark measure of unbilled volumes which is derived using
independently verified data and by assessing historical weather-adjusted consumption patterns and actual meter data that is
used in industry reconciliation processes for total consumption by supplier. This aspect of the corroboration process,
which requires a comparison of the estimated supplied quantity of electricity or gas that is deemed to have been delivered
to customers and the aggregate supplied quantity of electricity or gas applicable to the Group's customers that is measured
by industry system operators, is a key judgement. The assessment of electricity unbilled revenue is further influenced by
the impact on national settlements data or feed-in-tariff supported volumes and spill from solar PV generation. The
experience of the Group is that the industry estimated supplied quantities in gas have historically been higher than actual
metered supply. To take account of this, the Group applies a further judgement, being a percentage reduction to unbilled
consumption volume, to the measurement of its unbilled revenue in the financial statements. It is expected that this
judgement will become less critical as the industry transitions to smart meter technology.
(iii) Valuation of trade receivables - Estimation Uncertainty
The basis of determining the provisions for bad and doubtful debts is explained at Note 16 of the financial statements in
the section on credit risk and aged debt. While the provisions are considered to be appropriate, changes in estimation
basis or in economic conditions could lead to a change in the level of provisions recorded and consequently on the charge
or credit to the income statement.
(iv) Retirement benefits - Estimation Uncertainty
The assumptions in relation to the cost of providing post-retirement benefits during the period are based on the Group's
best estimates and are set after consultation with qualified actuaries. While these assumptions are believed to be
appropriate, a change in these assumptions would impact the level of the retirement benefit obligation recorded and the
cost to the Group of administering the schemes. The value of scheme assets are impacted by the asset ceiling test which
(a) restricts the surplus that can be recognised to assets that can be recovered fully through refunds and (b) may increase
the value of scheme liabilities where there are minimum funding liabilities in relation to agreed contributions. Further
detail on the estimation basis is contained in Note 32 of the financial statements.
4.2 Other key accounting judgements
Other key accounting judgements applied in the preparation of these Financial Statements include the following:
(i) Business Combinations and acquisitions - Accounting Judgement
Business combinations and acquisitions require a fair value exercise to be undertaken to allocate the purchase price to the
fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair value of the
assets and liabilities is based, to a certain extent, on management's judgement. The amount of goodwill initially
recognised as a result of a business combination is dependent on the allocation of this purchase price to the identifiable
assets and liabilities with any unallocated portion being recorded as goodwill. Business combinations are disclosed in Note
12.
Notes to the Preliminary Statement
for the year ended 31 March 2016
4 Critical accounting judgements and key sources of estimation uncertainty (continued)
4.2 Other key accounting judgements (continued)
(ii) Energy Company Obligation (ECO) costs - Accounting Judgement
The Energy Company Obligation ('ECO') legislation, in force since 1 January 2013, requires qualifying energy suppliers to
meet defined targets by providing measures to improve the energy efficiency of and level of carbon emissions from UK
domestic households. The targets for the Group's Energy Supply business are set based on historic customer information with
delivery of the measures being required by 31 March 2017. The Group believes it is not technically obligated to provide
those measures until the end of the delivery period. As a consequence and applying applicable accounting standards, the
costs of ECO are recorded when measures are delivered or other qualifying expenditure has been incurred.
(iii) Treatment of disputes and claims - Accounting Judgement
The Group is exposed to the risk of litigation, regulatory judgements and contractual disputes through the course of its
normal operations. The Group considers each instance separately in accordance with legal advice and will provide or
disclose information as deemed appropriate. Changes in the assumptions around the likelihood of an outflow of economic
resources or the estimation of any obligation would change the values recognised in the financial statements.
(iv) Consolidation of interest in Clyde Windfarm (Scotland) Limited- Accounting Judgement
On 18 March 2016, the Group completed the sale of 49.9% of the equity in Clyde Windfarm (Scotland) Limited ('Clyde').
Details of this transaction are included at Note 12. The Group is providing project and contract management services for
and 100% of the funding for the construction of the 172.8MW extension of the wind farm. As part of this arrangement, the
Group has retained a casting vote over the engineering, procurement and construction of the extension and certain rights
over the construction of the extension. Under IFRS 10 Consolidated Financial Statements, the extension is considered to be
a 'relevant activity' which significantly affects the future returns from Clyde and the rights retained by the Group have
been concluded to confer power to control the relevant activities of Clyde to the Group. As a consequence, this entity has
been fully consolidated into the Group's financial statements. This means that the gain on the transaction has been
recorded in equity and the co-venturers' ownership share is represented as a non-controlling interest. On 13 May 2016, the
Group agreed to waive those contractual rights which gave rise to the judgement that power to control the relevant
activities existed over Clyde. All other contractual arrangements remain in place. As a consequence, the Group will
prospectively account for its interest in Clyde as that of an investment in an equity-accounted joint venture. One of the
impacts of that change to the consolidation basis will be to remove the equivalent to the £200.7m of non-recourse
borrowings held by Clyde from the Group's consolidated balance sheet. In addition, the Group's interest in the entity is
expected to remain that of an equity-accounted joint venture following completion of the extension construction project.
Given this change in circumstance and on the basis the £200.7m debt item is non-recourse to the Group, this item has been
excluded from the Group's 'adjusted net debt and hybrid capital' measure.
4.3 Other areas of estimation uncertainty
(i) Provisions and contingencies
The assessments undertaken in recognising provisions and contingencies have been made in accordance with IAS 37. Provisions
are calculated based on estimations. The evaluation of the likelihood of the contingent events has required best judgement
by management regarding the probability of exposure to potential loss. Should circumstances change following unforeseeable
developments, this likelihood could alter.
(ii) Decommissioning costs
The estimated cost of decommissioning at the end of the useful lives of certain property, plant and equipment assets is
reviewed periodically and has been reassessed in the year to 31 March 2016. Decommissioning costs in relation to gas
exploration and production assets are based on expected lives of the fields and costs of decommissioning. Provision is made
for the estimated discounted cost of decommissioning at the balance sheet date. The dates for settlement of future
decommissioning costs are uncertain and are currently expected to be incurred predominantly between 2017 and 2040.
(iii) Gas and liquids reserves
The volume of proven and probable (2P) gas and liquids reserves is an estimate that affects the unit of production
depreciation of producing gas and liquids property, plant and equipment. This is also a significant input estimate to the
associated impairment and decommissioning calculations. The impact of a change in estimated proven and probable reserves is
dealt with prospectively by depreciating the remaining book value of producing assets over the expected future production.
If proven and probable reserves estimates are revised downwards, earnings could be affected by higher depreciation expense
or an immediate write-down (impairment) of the asset's book value.
Notes to the Preliminary Statement
for the year ended 31 March 2016
5. Segmental information
The Group's operating segments are those used internally by the Board to run the business and make strategic decisions. The
Group's main businesses and operating segments are the Networks business, compromising Electricity Distribution,
Electricity Transmission and Gas Distribution; the Retail business, compromising Energy Supply, Enterprise and
Energy-related Services; and Wholesale, comprising Energy Portfolio Management and Electricity Generation, Gas Storage and
Gas Production.
In March 2014, the Group announced its intention to reorganise its activities so that there are separately auditable legal
entities responsible for its Energy Supply, Energy Portfolio Management (EPM) and Electricity Generation activities. This
change was made to enhance the transparency of the measurement and reporting of the performance of these activities. There
is now a subsidiary company, SSE EPM Limited, which is responsible for managing the Group's commodity requirements.
The establishment of this company does not change the Group's basis of inter-segmental pricing or its basis of reporting
operational performance to the Board. The methodology in place promotes market reflectivity and closely aligns with the
operational decision-making in the respective businesses. EPM and Electricity Generation continue to be reported to the
Board as a single reportable operating segment.
The types of products and services from which each reportable segment derives its revenues are:
Business Area Reported Segments Description
Networks Electricity Distribution The economically regulated lower voltage distribution of electricity to customer premises in the North of Scotland and the South of England
Electricity Transmission The economically regulated high voltage transmission of electricity from generating plant to the distribution network in the North of Scotland
Gas Distribution SSE's share of Scotia Gas Networks, which operates two economically regulated gas distribution networks in Scotland and the South of England
Retail Energy Supply The supply of electricity and gas to residential and business customers in the UK and Ireland
Enterprise The integrated provision of services in competitive markets for industrial and commercial customers including electrical contracting, private energy networks, lighting services and telecoms capacity and bandwidth
Energy-related Services The provision of energy-related goods and services to customers in the UK including meter reading and installation, boiler maintenance and installation and domestic telecoms and broadband services
Wholesale Energy Portfolio Management and Electricity Generation The generation of power from renewable and thermal plant in the UK and Ireland and the optimisation of SSE's power and gas and other commodity requirements
Gas Storage The operation of gas storage facilities in the UK
Gas Production The production and processing of gas and oil from North Sea fields
The internal measure of profit used by the Board is 'adjusted profit before interest and tax' or 'adjusted operating
profit' which is arrived at before exceptional items, the impact of financial instruments measured under IAS 39, the net
interest costs associated with defined benefit pension schemes and after the removal of taxation and interest on profits
from joint ventures and associates.
Analysis of revenue, operating profit, assets and other items by segment is provided below. All revenue and profit before
taxation arise from operations within the United Kingdom and Ireland.
Notes to the Preliminary Statement
for the year ended 31 March 2016
5 Segmental information (continued)
5.1 Revenue by segment
External revenue Intra-segment revenue Total revenue External revenue Intra-segment revenue,restated (i) Total revenue,restated
(i)
2016£m 2016£m 2016£m 2015£m 2015£m 2015£m
Networks
Electricity Distribution 689.0 243.6 932.6 735.6 288.0 1,023.6
Electricity Transmission 367.9 - 367.9 246.7 0.2 246.9
1,056.9 243.6 1,300.5 982.3 288.2 1,270.5
Retail
Energy Supply 7,548.3 83.2 7,631.5 7,961.2 30.3 7,991.5
Enterprise 455.1 96.6 551.7 495.7 155.4 651.1
Energy-related Services 118.2 112.9 231.1 112.6 97.3 209.9
8,121.6 292.7 8,414.3 8,569.5 283.0 8,852.5
Wholesale
Energy Portfolio Management and Electricity Generation 19,525.3 3,780.6 23,305.9 22,023.7 4,015.4 26,039.1
Gas Storage 5.7 214.3 220.0 9.7 211.8 221.5
Gas Production 2.2 144.9 147.1 1.3 177.5 178.8
19,533.2 4,139.8 23,673.0 22,034.7 4,404.7 26,439.4
Corporate unallocated 69.6 258.9 328.5 67.9 225.8 293.7
Total 28,781.3 4,935.0 33,716.3 31,654.4 5,201.7 36,856.1
(i) Significant intra-segment revenue is derived from use of system income received by the Electricity
Distribution business from Energy Supply; Energy Supply provides internal heat and light power supplies to other Group
companies; Enterprise provides electrical contracting services and telecoms infrastructure charges to other Group
companies; Energy-related Services provides metering and other services to other Group companies; Energy Portfolio
Management and Electricity Generation provides power, gas and other commodities to the Energy Supply segment; Gas Storage
provides the use of Gas Storage facilities to Energy Portfolio Management; Gas Production sells gas from producing North
Sea fields to the Electricity Generation and Energy Portfolio Management segment. Corporate unallocated provides corporate
and infrastructure services to the operating businesses. All are provided at arm's length basis.
Revenue within Energy Portfolio Management and Electricity Generation includes revenues from generation plant output and
the gross value of all wholesale commodity sales including settled physical and financial trades. These are entered into to
optimise the performance of the generation plants and to manage the Group's commodity risk exposure. Purchase trades are
included in cost of sales.
Revenue from the Group's investment in Scotia Gas Networks SSE share being £549.9m (2015 - £659.2m) is not recorded in the
revenue line in the income statement.
Revenue by geographical location is as follows:
2016 2015
£m £m
UK 28,035.4 30,923.3
Ireland 745.9 731.1
28,781.3 31,654.4
Notes to the Preliminary Statement
for the year ended 31 March 2016
5. Segmental information (continued)
5.2 Operating profit/(loss) by segment
2016
Adjusted operating profit reported to the Board JV / Associate share of interest and tax (ii) Before exceptional items and certain re-measurements Exceptional items andcertain re-measurements Total
£m £m £m £m £m
Networks
Electricity Distribution 370.7 - 370.7 - 370.7
Electricity Transmission 287.2 - 287.2 - 287.2
Gas Distribution 268.7 (142.0) 126.7 48.6 175.3
926.6 (142.0) 784.6 48.6 833.2
Retail
Energy Supply 398.9 - 398.9 - 398.9
Enterprise 40.9 - 40.9 - 40.9
Energy-related Services 15.4 - 15.4 (17.8) (2.4)
455.2 - 455.2 (17.8) 437.4
Wholesale
Energy Portfolio Management and Electricity Generation 436.3
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