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.
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: | 1,316p | MARKET VALUE: | £13.6bn | |
TOUCH: | 1,315-1,317p | 12-MONTH HIGH: | 1,335p | LOW: 998p |
DIVIDEND YIELD: | 7% | PE RATIO: | 8 | |
NET ASSET VALUE: | 465p | NET DEBT: | £9.9bn* |
Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2018 | 3.32 | -285 | -26.4 | 29.3 |
2019 | 3.05 | 129 | 6.2 | 24.0 |
% change | -8 | - | - | -18 |
Ex-div: | 16 Jan | |||
Payment: | 13 Mar | |||
*Excludes lease liabilities of £454m |