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SSE gets renewable boost

The group's low carbon-strategy is starting to bear fruit
November 13, 2019

Buoyed by the UK’s ambition to reach net zero emissions by 2050, SSE (SSE) views renewable energy as a central component of future earnings growth. Spanning wind, hydro and pumped storage, adjusted operating profit from the group’s renewable assets almost doubled to £150m in the first half of the 2020 financial year. By increasing capacity by 8 per cent, total renewable generation rose by nearly a quarter to 4,045 gigawatt hours. The group is aiming to treble its annual output of renewable electricity to 30 terrawatt hours by 2030.

IC TIP: Hold at 1,316p

With favourable weather conditions since September, a better-than-expected renewable output to date is feeding into a more positive outlook for the rest of the year. Although the gas production assets are up for sale, retained hedging contracts are set to add an estimated 3p to full-year adjusted earnings per share (EPS), guidance for which has been bumped up from 83p to 88p.

Net debt has ticked up by 5 per cent to £9.9bn, reflecting ongoing capital expenditure and share buybacks. Out of £638m of capital expenditure, a fifth was spent on the renewables portfolio while the majority was invested in the regulated electricity networks. Around £1.4bn of capital expenditure is expected for the full year.

RBC Capital Markets forecasts adjusted pre-tax profit of £1.04bn and EPS of 85.2p for the full year, up from £726m and 67.1p in 2019.

SSE (SSE)    
ORD PRICE:1,316pMARKET VALUE:£13.6bn
TOUCH:1,315-1,317p12-MONTH HIGH:1,335pLOW: 998p
DIVIDEND YIELD:7%PE RATIO:8
NET ASSET VALUE:465pNET DEBT:£9.9bn*
Half-year to 30 SepTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20183.32-285-26.429.3
20193.051296.224.0
% change-8---18
Ex-div:16 Jan   
Payment:13 Mar   
*Excludes lease liabilities of £454m