Investment on course
SSE half-year profits fall, dividend increased
It declared a 1.9% rise in its interim dividend to 27.4p per share, up 1.9%.
It said it will undertake capital and investment expenditure of around £1.85bn, which would be the highest annual investment and capital expenditure by the company to date.
This follows the decision to invest in the 225MW Stronelairg onshore wind farm which means SSE has 1GW of wind farm capacity in construction or pre-construction.
· Interim dividend increased by 1.9% to 27.4p per share
· Adjusted earnings per share fell by 25.5% to 34.2p, reflecting lower profits in Wholesale and Retail and an unusually high proportion of hybrid bond coupon payments made in the first half of the financial year
· Adjusted profit before tax declined by 13.3% to £475.8m, but is the second highest H1 profit before tax delivered by SSE
· Reported earnings per share increased 143% to 47.2p reflecting the cumulative impact of positive mark-to-market valuations on commodity and financial derivatives
· Reported profit before tax increased by 167% to £615.9m also reflecting the cumulative impact of positive mark-to-market valuations on commodity and financial derivatives
· Investment and capital expenditure rose 3.3% to £782.4m
· Adjusted net debt and hybrid capital increased by 7.2% in the half year to £8,995.4m as a result of the phasing of capital expenditure and movements in foreign exchange rates.
For the financial year 2016/17 as a whole, SSE expects to:
· Deliver an annual increase in the dividend that at least keeps pace with RPI inflation and which is covered in the range from around 1.2 times to around 1.4 times
· Achieve a return to growth and deliver adjusted earnings per share of at least 120 pence
· Undertake capital and investment expenditure of around £1.85bn
In the period to December 2017, SSE intends to:
· Use the proceeds from the sale of part of its stake in SGN (around £600m, net of transaction costs) to create value for shareholders by directing around £100m to support investment in Stronelairg and currently intends to return value to shareholders by way of an on-market share buy-back of around £500m. Thereafter, the ongoing adjusted EPS impact of the sale and the use of the proceeds should be broadly neutral.
Looking further ahead, SSE remains on course to:
· Deliver annual dividend increases that keep pace with RPI inflation
· Achieve dividend cover within a range of around 1.2 times to 1.4 times over the three years to March 2019
· Undertake capital and investment expenditure totalling almost £6bn over the four years to March 2020.