SSE sets out dividend plans for coming five years

SSE's profits fell but the energy supplier lifted its full year dividend 3.7% to 94.7p as it prepared for a significant year of transformation in 2018 and set out plans for cash payouts in the years beyond.

Assuming that it will spin out its household energy supply and services business into a joint venture with Npower called SSE Energy Services by at least the end of March next year, subject to regulatory approval due in October, and the imposition of the government's price cap, SSE said planned to recommend a 3% hike in the full-year dividend to 97.5p per share for 2018. This is broadly in line with expectations for RPI inflation and has been set out so that it is not subject to the timing of either the Energy Services spin-out or the tariff cap.

For the year ending March 2020, the FTSE 100 group is planning to set the first post-transaction dividend at 80.0 pence per share, which reflects the impact of the changes in the SSE group expected to take effect by then. This provides a sustainable basis for future dividend growth.

For 2020/21, 2021/22 and 2022/23, the company is "targeting annual increases in the full-year dividend that at least keep pace with RPI inflation". This reflects SSE's confidence in the quality and value of its assets and earnings and cash flows they deliver.

SSE, whose shareholders will receive one share in the planned new independent energy supply and services company for every one SSE share they hold at the demerger date, said it intends to retain a scrip dividend scheme but where take-up of the full-year dividend exceeds 20%, it now intends to buy back shares so the dilutive effect of the scrip is limited.

Chairman Richard Gillingwater said, "For investors, by giving clarity on the dividend for the five years to March 2023, SSE is demonstrating that remunerating them for their investment is and will remain its first financial objective."

After adjusted profit before tax fell 6% to £1.45bn in the year to 31 March, with adjusted earnings per share down 3.6% to 121.1p, Gillingwater hailed the "generally very robust" operational performance in a year of a number of complex challenges. "It is encouraging that the company's financial results are ahead of expectations at the start of the financial year."

"The challenges will continue in 2018/19, which is also expected to be a year of major transition for SSE," he said, pointing to a strong focus on investment that will see around £1.7bn spent and adjusted net debt and hybrid capital expected to peak at around £10bn and to fall back towards £9bn by 2023.