SSE keeps dividend, sees Covid impact this year

Renewable energy firm SSE maintained its dividend as it reported better-than-expected full year profits but warned of a hit this year from the coronavirus pandemic.

Adjusted pre-tax profits rose 49% to £1.02bn, and its reported profit before tax fell 55% to £587.6m, while adjusted earnings per share were ahead 35% at 83.6p, within its forecast range of 83p to 88p.

The board recommended a final dividend of 56p per share for payment on 18 September, making a full year dividend of 80p per share.

SSE said at this stage it expected a £150m - £250m hit in 2020/21 from Covid-19 due to lower energy demand.

Reported earnings per share were down 67% at 40.6p while full year operating profit fell 40% to £963.4m for the 12 months to March 31.

The fall in reported figures came after a net exceptional charge of £738.7m before tax, consisting of £529m on discontinued operations, and £209.7m on continuing operations, including £33.7m relating to coronavirus impacts on bad debts.

SSE moved into renewable energy after offloading its household energy supply and services division to OVO Energy earlier this year for £500m.

Capital and investment expenditure was down 5% at £1.357bn, and the company’s adjusted net debt and hybrid capital stood at £10.5bn, in line with the forecast.

The company said it was maintaining good liquidity, reducing its planned cash outflow - mainly capital expenditure - by at least £250m in the 2021 financial year, and securing value from disposals of at least £2bn by the autumn of 2021.

It said it planned to invest capital and investment of around £7.5bn net in the five years to 2025, focussing on core strategic decarbonisation projects.

“[The] 2020 [financial year] was a year of progress for SSE,” said chair Richard Gillingwater.

“Financially, there was a solid recovery from the previous year.

“Strategically, we reshaped the group with the sale of Energy Services and increased our focus on our core businesses of regulated electricity networks and renewable energy.”

Gillingwater said operationally, those businesses made “significant progress” towards the firm’s strategic priorities and ambition to be a leading energy company in a net zero world.

“Since March, SSE's overriding priority has been to support the safe and reliable supply of the electricity upon which the people and organisations responding directly to coronavirus depend and the commitment of people across SSE in challenging circumstances has been outstanding.

“It is still too soon to predict with accuracy the full human, social, economic and business impact of coronavirus, but we have put in place a comprehensive plan to achieve the related objectives of sustaining the dividend payments which provides vital income for people's pensions and savings - income which is now more important than ever; and promoting the long-term success of SSE for the benefit of all its stakeholders.”

Gillingwater added that climate change remained a “critical issue”, with the company looking at “significant opportunities” to create sustainable value for shareholders there.

Russ Mould, investment director at AJ Bell, said SSE’s decision to withdraw from the “rough-and-tumble” of the retail energy market, limited hit from unpaid bills and confirmation of its 80p-a-share annual dividend were certainly generating interest in its shares, as it looked to focus on the power generation and transmission markets for the long term.

“SSE has also repeated its commitment to its five-year dividend payment plan that runs to 2023, whereby the firm will increase dividend distribution by the rate of [the] retail price index inflation for each year.

“This will come as a relief to income-hungry investors, even if the 80p-a-share payment represents a decrease on last year’s distribution and ends a long streak of increases in the annual dividend that dates back to at least 1998 and the merger between Scottish Hydro-Electric and Southern Electric, according to Refinitiv data.

“SSE had warned in its March trading update that a surge in unpaid bills or a deep drop in demand for electricity thanks to the Covid-19 outbreak could have influenced its thinking on dividends, at least in terms of the timing of payments.”

At 1257 BST, shares in SSE were up 8.83% at 1,381p.