Perth power giant SSE eyeing fresh disposal as profits and dividends stay on track

SSE, the Perth-headquartered energy giant, is eyeing the disposal of its stake in the Scotia Gas Networks (SGN) distribution business after unveiling a £200 million hit to profits from the coronavirus crisis.
SSE is one of the biggest players in the UK's renewables energy sector. Picture: John DevlinSSE is one of the biggest players in the UK's renewables energy sector. Picture: John Devlin
SSE is one of the biggest players in the UK's renewables energy sector. Picture: John Devlin

In a trading update, the group said it was on track to bank in excess of £2 billion from a disposals programme that is “creating value and furthering SSE’s strategic focus on net zero”.

It has appointed banks to review options for divestment of all or part of its stake in SGN – which distributes natural and green gas to millions of homes and businesses – and said it would decide on approach and timings before the end of the financial year.

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The group said the impact of the pandemic on full-year operating profit is set to be towards the middle of the £150m to £250m range originally estimated in its full-year results in June.

Bosses still expect full-year 2020/21 adjusted earnings per share of between 85p and 90p, based on normal weather conditions prevailing for the final three months of the year. That remains in line with December’s guidance.

The group intends to recommend a full-year dividend of 80p per share plus RPI inflation for 2020/21 and continues to target annual RPI increases to 2023 as set out in its five-year dividend plan.

SSE has already set out ambitious plans to treble its renewable output over the next decade.

Finance director Gregor Alexander said: “With solid operational performance and strong strategic execution, SSE is well positioned as we move towards the end of our financial year.

“Our robust business model is mitigating the impact of coronavirus, our disposal programme is proceeding at pace and at Dogger Bank [wind farm] we have shown yet again that we can develop opportunities and create value from world-class assets.

“With a number of uncertainties lifting and an increasingly supportive policy environment which further underpins our clear strategic focus on the transition to net zero, SSE is on a strong strategic footing for the rest of 2020/21 and beyond.”

Neil Shah, director of research for Edison Group, noted: “Unsurprisingly, Covid-19 has had a significant impact on the utilities company, hitting full-year operating profit by around £200m, but it is encouraging that forecasts for full-year dividends and adjusted earnings per share remain the same.

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“The company continues to focus on renewable power generation and networks, likely selling all or some of its stake in Scotia Gas Networks, and is participating in auctions with the aim of trebling renewables output by 2030.”

Donald Brown, senior investment manager at wealth manager Brewin Dolphin, said: “SSE continues to make progress in re-shaping its business, with a greater focus on renewables and the disposal of non-core assets.

“The ‘green recovery’ from Covid-19 prioritised by governments should play to SSE’s strengths and shareholders will be pleased to see continued commitment to RPI-linked dividend increases over the next couple of years – particularly with income remaining precarious elsewhere.

“The company’s shares are basically unchanged over the year, which is a decent barometer of its success in managing the many challenges of 2020 and compares favourably to the FTSE 100, which is down 11 per cent since January 2020.”

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