Shares in energy network and renewables company SSE (SSE) surged 9% to £13.8 on Wednesday after recommitting to its promise to keep dividend growth above inflation.
SSE recommended a final payout of 56p per share (to be paid on 18 September), giving investors a full year to 31 March 2020 dividend of 80p per share. That’s in line with five-year 2018/19 to 2022/23 dividend plan, SSE said.
Inflation for May was today reported at 0.5%, giving a three-month average of 1.4%, below the Bank of England's 2% target.
SSE paid shareholders a 97.5p per share dividend for full year to March 2019, although the group has since spun-off its energy supply business.
PROFITS FACING PRESSURE
Adjusted operating profit last year jumped 37% to £1.5bn, about in line with forecasts. But the current year will see the full impact of the UK’s lockdown, and anticipated reduction in electricity demand.
This is expected to reduce operating profits by between £150m and £250m before mitigation benefits. SSE has deferred earnings per share guidance until later in the year.
SSE plans to offset some of these pressures by reducing capital expenditure budgets. The company expects to cut at least £250m this year, and hopes to secure at least £2bn from disposals by the autumn of 2021.
But lower investment will not affect the rough £580m it has committed to the Viking onshore wind farm, offshore the Shetland’s, SSE said in a separate announcement. Construction is expected to start in late summer.
INCOME REASSURANCE
These actions will help maintain the dividend programme and strengthen the balance sheet ensuring net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) reduces to the lower end of the target of 4.5 to five-times between 2021/22 and 2024/25 financial years.
The company announced a new target to reduce its carbon intensity by 60% by 2030, building on the 50% reduction already achieved. There are plans to invest £7.5bn in new and upgraded electricity infrastructure over the five-years to 2025.
