SSE lifts dividend ahead of expected tough year

Energy company SSE posted its preliminary results for the year to 31 March on Wednesday, with the board lifting its recommended full-year dividend by 2.1% to 91.3p while adjusted earnings per share were up 5.2% at 125.7p.

The FTSE 100 firm said its adjusted dividend cover was towards the top of its expected range at 1.38 times, while adjusted operating profit improved 2.7% to £1,874.0m.

Adjusted profit before tax was 2.1% higher at £1,545.9m, and adjusted profit after tax was up 6.1% to £1,268.9m.

The board reported a net exceptional charge of £8.2m, consisting of net charges of £374.6m offset by £366.4m from the gain on sale of the SGN stake and the revaluation of SSE's Clyde wind farm investment.

Investment and capital and investment expenditure was up 6.6% to £1.7bn, with adjusted net debt and hybrid capital up 1.1% to £8.5bn as at 31 March.

There were on-market share buy backs totalling £131m in the period to 31 March, plus an additional £65m in April, SSE’s board confirmed.

Looking ahead at the 2017/18 financial year, SSE said it was targeting an annual increase in the full-year dividend that was at least equal to RPI inflation.

The company would also work to keep dividend cover within the expected range of around 1.2- 1.4 times, although it was likely to be towards the bottom of that, as stated in SSE's Notification of Pre Close Statement on 30 March.

That also meant adjusted earnings per share was likely to be lower than it was in 2016/17.

SSE said it was expecting to invest around £1.7bn in building, owning and operating assets, with around two thirds of that in electricity networks and renewable energy.

“The operating environment has presented a number of complex challenges to manage, but SSE is a resilient business with a clearly defined and long-term strategic framework comprising operational efficiency, disciplined investment in new assets and a balanced range of energy businesses,” said SSE chairman Richard Gillingwater.

“The complex challenges continue, but this strategy puts the company in good stead for the future and SSE is committed to delivering for its customers and its investors alike in the years ahead; and that means the board is committed to continuing to meet SSE's first financial objective of annual dividend growth of at least RPI inflation in the years ahead.”

Alistair Phillips-Davies, chief executive of SSE, said the company had been clear for some time that the 2017/18 year presented challenges, adding that the need to engage constructively with a new UK government as it took forward energy policy would be a key priority for the year ahead and beyond.

“SSE will continue to focus on securing maximum value from our portfolio of wholesale assets, achieving further efficiencies and customer service improvements in our networks businesses, responding positively to evolution and change in our retail markets and creating long-term value through investment of around £1.7bn in new assets in 2017/18.

“Across the SSE group, we will continue to take the decisions necessary to secure the right outcomes for customers and investors,” Phillips-Davies explained.

“With a strong and growing asset base, and significant index-linked revenues, we remain committed to delivering annual dividend growth that at least keeps pace with inflation, and to working towards ensuring that dividend cover remains within the expected range.”