Focus on renewables
SSE ‘committed’ to dividends, confirms wind farm
Viking will be UK’s largest onshore windfarm
Richard Gillingwater, chairman of renewables-focused SSE, said the company is committed to paying dividends despite announcing a lower payout for the last financial year.
Mr Gillingwater said dividend provide “vital income for people’s pensions and savings… income which is now more important than ever”.
The Perth-based company is cutting its proposed final dividend to 56p per share, compared to last year’s 68.2p, making a full year dividend of 80p per share (2019: 97.5p).
After selling its retail business to Ovo in January the company is now focused on renewables generation and will invest over £7 billion in major low-carbon construction projects to support net zero and spur a green economic recovery.
It has confirmed that it will go ahead with the £580m Viking Onshore Wind Farm on Shetland and the £3bn Seagreen Offshore Wind Farm, with Total, which will be the largest in Scotland when built. Together they will create about 800 jobs and support thousands more in the supply chain.
The Viking Wind Farm lost out on a UK Government subsidy bid in September. The 443 megawatt (MW) project will be the UK’s largest onshore wind farm in terms of annual electricity output once complete.
Chief executive Alistair Phillips-Davies said: “SSE is well placed to benefit in subsequent years from the expected economic recovery and associated focus on the transition to net zero emissions.”
Adjusted operating profit was up 37% to £1.488 billion as it recovered from a challenging 2018/19. Reported profit before tax down 55% to £587.6m and reported operating profit was also 40% lower at £963.4m.
SSE said it was too soon to predict accurately the full extent of the coronavirus hit to the business, but said it expected a negative impact of £150-250m in 2020/21, mainly because of lower energy demand.
John Moore, senior investment manager at Brewin Dolphin, said: “SSE has committed to its progressive dividend policy, which will be a massive relief to many income investors in the current climate.
“Aside from that, it’s a mixed bag for the underlying business, with its generation assets picking up slack from regulated activities.
“The investment in a major onshore wind project in Shetland is a significant move, as it helps grow the successful renewable energy division.
“However, in overall terms, the immediate trading picture appears more challenging and, although it appears to be in decent shape, SSE remains a business in transition.
“Whilst the dividend commitment will be welcome in many quarters, it does leave the company with little financial flexibility.”
Russ Mould, AJ Bell investment director, said: “SSE’s decision to withdraw from the rough-and-tumble of the retail energy market, limited hit from unpaid bills and confirmation of its 80p-a-share annual dividend for the last financial year are all generating interest in the utility’s shares from investors as the firm looks to focus on the power generation and transmission markets for the long term.
“SSE has also repeated its commitment to its five-year dividend payment plan that runs to 2023, whereby and the firm will increase dividend distribution by the rate of retail price index (RPI) inflation for each year.
“This will come as a relief to income-hungry investors, even if the 80p-a-share payment represents a decrease on last year’s distribution and ends a long streak of increases in the annual dividend that dates back to at least 1998 and the merger between Scottish Hydro-Electric and Southern Electric, according to Refinitiv data.
“SSE had warned in its March trading update that a surge in unpaid bills or a deep drop in demand for electricity thanks to the COVID-19 outbreak could have influenced its thinking on dividends, at least in terms of the timing of payments.”
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