SSE Half-year Report posted on Company News.

[idpickering]

Here; viewtopic.php?p=458643#p458643

The item includes this;

An interim dividend of 25.5p per ordinary share (2020: 24.4p) has been proposed and is due to be paid on 10 March 2022 to those shareholders on the SSE plc share register on 14 January 2022. The proposed interim dividend has not been included as a liability in these financial statements. A scrip dividend will be offered as an alternative.

Ian.

[moorfield]

It also includes this:

Growth-enabling dividend plan paying at least £3.50 per share across the five years, comprising a rebase to 60p in 23/24, with attractive annual growth of at least 5% to March 2026.

That word again. That will be the second big dividend cut from SSE in five years. Oh dear. Your recent choice of the likes of UKW Ian maybe the way to go in future.

Time to sell SSE?

[Dod101]

It also includes this:

Growth-enabling dividend plan paying at least £3.50 per share across the five years, comprising a rebase to 60p in 23/24, with attractive annual growth of at least 5% to March 2026.

That word again. That will be the second big dividend cut from SSE in five years. Oh dear. Your recent choice of the likes of UKW Ian maybe the way to go in future.

Time to sell SSE?

I am struggling to find that comment. Can you point me in the right direction? I am more concerned about the short term outlook which indicate not just an increase in the interim announced but also in the Final forb the current financial year. I would though be interested to put the rebasing in context.

These results indicate a company 'in tune' with the green agenda and to that extent at least one I will keep.

Dod

[moorfield]

I am struggling to find that comment. Can you point me in the right direction? I am more concerned about the short term outlook which indicate not just an increase in the interim announced but also in the Final forb the current financial year. I would though be interested to put the rebasing in context.

These results indicate a company 'in tune' with the green agenda and to that extent at least one I will keep.

It's the fifth bullet point on the quote. That the company is in tune with the green agenda maybe so, but that isn't much use to the HYP investor seeking a high and growing income stream. SSE cannot now be a HYP buy or top up for several years, surely. It is reckoning it will be paying ~69p in 2026 and beyond, still 15% down on current.

[Dod101]

I am struggling to find that comment. Can you point me in the right direction? I am more concerned about the short term outlook which indicate not just an increase in the interim announced but also in the Final forb the current financial year. I would though be interested to put the rebasing in context.

These results indicate a company 'in tune' with the green agenda and to that extent at least one I will keep.

It's the fifth bullet point on the quote. That the company is in tune with the green agenda maybe so, but that isn't much use to the HYP investor seeking a high and growing income stream. SSE cannot now be a HYP buy or top up for several years, surely.

Found it thanks. This seems to be part of the cost of the Net Zero Plan but they have not made any further comment anywhere. Your point of course is for HYPers to decide. I am not a HYPer so will judge the matter on its own merits but it does seem surprising that they have not made more of that comment but just slipped it in. I see a letter to the Chairman coming up.

Dod

[idpickering]

I bought into SSE four times last year. Although the concerns re a potential dividend cut are an issue, it won’t budge me from continuing to hold SSE though. I wouldn’t buy now though.

Moorfield’s comment regarding me buying into Greenfireld UK Wind is a sound one imho. I do intend topping up my holdings of UKW soon. Today I’m buying more HICL, and that’ll be it for them for now at least.

Ian.

[daveh]

Found it thanks. This seems to be part of the cost of the Net Zero Plan but they have not made any further comment anywhere. Your point of course is for HYPers to decide. I am not a HYPer so will judge the matter on its own merits but it does seem surprising that they have not made more of that comment but just slipped it in. I see a letter to the Chairman coming up.

Dod

Look here:
https://www.investegate.co.uk/sse-plc-- ... 00066096S/

KEY ELEMENTS OF NET ZERO ACCELERATION PROGRAMME

Fully-funded £12.5bn five-year strategic capital investment plan to 2026 focused on net zero infrastructure:

· £12.5bn net capex investment to 2026 represents +65% step-up in annual investment (£1bn additional capital investment per year) on previous plan with over 2.5 times more capital now allocated to renewables growth.

· Investment will deliver ~4GW net renewables capacity additions (doubling renewables capacity) and grow electricity networks underlying RAV to ~£9bn net of assumed 25% minority stake sales.

· The plan is supported by further renewables partnering; and minority stake sales in both SSEN Transmission and SSEN Distribution (modelling assumption of early FY24) to unlock value and optimise investment.

· Reshaped capital allocation to c40% Networks, c40% Renewables, c20% other flexible generation, distributed energy and customer businesses.

· Adjusted EPS CAGR of 5-7% forecast to March 20261, after assumed minority interest.

· Growth-enabling dividend, paying at least £3.50 per share across the five years, comprising:

o completion of current RPI linked dividend plan to March 2023

o followed by a rebased dividend to 60p in 23/24 with attractive annual growth of at least 5% to March 2026

o scrip dividend option capped at 25%

· Net debt to EBITDA target of 4.5x, aligned with a strong investment grade credit rating.

1 Relative to FY21 87.5p

and

A dividend plan to support accelerated growth

SSE has confirmed its previous commitments to shareholders to target dividend increases in line with RPI in the remaining two financial years of the previous five-year plan to 31 March 2023. Looking further ahead, the Board has considered what the right dividend policy should be thereafter. In doing so, the Board has assessed and balanced a number of factors, including: financial and sector market trends; credit metrics and cashflow profiles; total shareholder returns; growth opportunities; and different funding options, including minority network stake sales.

The Board believes that SSE's accelerated capex plan to 2026 and the opportunities it creates in the years that follow will require a dividend plan which is aligned to this growth profile. Correspondingly, following fulfilment of its existing commitments to 22/23, it will rebase its dividend to 60 pence in 23/24, before targeting at least 5% dividend increases in 24/25 and 25/26. This will amount to a total dividend per share of at least £3.50 over the five-year period to March 2026.

SSE will also retain a scrip dividend option for shareholders but will restrict earnings dilution by capping take-up at 25% from FY22 onwards.

The Board believes that this rebased dividend with attractive growth balances income to shareholders with appropriate funding and a credit rating for an accelerated growth plan that will ultimately create greater value and total return for shareholders over the long term.

[Dod101]

WE should not really I suppose widen the discussion to wider issues like holding other shares but those mentioned are entirely different in so many ways to SSE that they really do not compare.

Dod

[Dod101]

Found it thanks. This seems to be part of the cost of the Net Zero Plan but they have not made any further comment anywhere. Your point of course is for HYPers to decide. I am not a HYPer so will judge the matter on its own merits but it does seem surprising that they have not made more of that comment but just slipped it in. I see a letter to the Chairman coming up.

Dod

Look here:
https://www.investegate.co.uk/sse-plc-- ... 00066096S/

KEY ELEMENTS OF NET ZERO ACCELERATION PROGRAMME

Fully-funded £12.5bn five-year strategic capital investment plan to 2026 focused on net zero infrastructure:

· £12.5bn net capex investment to 2026 represents +65% step-up in annual investment (£1bn additional capital investment per year) on previous plan with over 2.5 times more capital now allocated to renewables growth.

· Investment will deliver ~4GW net renewables capacity additions (doubling renewables capacity) and grow electricity networks underlying RAV to ~£9bn net of assumed 25% minority stake sales.

· The plan is supported by further renewables partnering; and minority stake sales in both SSEN Transmission and SSEN Distribution (modelling assumption of early FY24) to unlock value and optimise investment.

· Reshaped capital allocation to c40% Networks, c40% Renewables, c20% other flexible generation, distributed energy and customer businesses.

· Adjusted EPS CAGR of 5-7% forecast to March 20261, after assumed minority interest.

· Growth-enabling dividend, paying at least £3.50 per share across the five years, comprising:

o completion of current RPI linked dividend plan to March 2023

o followed by a rebased dividend to 60p in 23/24 with attractive annual growth of at least 5% to March 2026

o scrip dividend option capped at 25%

· Net debt to EBITDA target of 4.5x, aligned with a strong investment grade credit rating.

1 Relative to FY21 87.5p

and

A dividend plan to support accelerated growth

SSE has confirmed its previous commitments to shareholders to target dividend increases in line with RPI in the remaining two financial years of the previous five-year plan to 31 March 2023. Looking further ahead, the Board has considered what the right dividend policy should be thereafter. In doing so, the Board has assessed and balanced a number of factors, including: financial and sector market trends; credit metrics and cashflow profiles; total shareholder returns; growth opportunities; and different funding options, including minority network stake sales.

The Board believes that SSE's accelerated capex plan to 2026 and the opportunities it creates in the years that follow will require a dividend plan which is aligned to this growth profile. Correspondingly, following fulfilment of its existing commitments to 22/23, it will rebase its dividend to 60 pence in 23/24, before targeting at least 5% dividend increases in 24/25 and 25/26. This will amount to a total dividend per share of at least £3.50 over the five-year period to March 2026.

SSE will also retain a scrip dividend option for shareholders but will restrict earnings dilution by capping take-up at 25% from FY22 onwards.

The Board believes that this rebased dividend with attractive growth balances income to shareholders with appropriate funding and a credit rating for an accelerated growth plan that will ultimately create greater value and total return for shareholders over the long term.

Thanks. I do not know why I did not find that. It does not make them look very clever although I suppose we can say that the first dividend cut was as a result of the disposal of the retail side and this one the big restructuring of the company towards the Net Zero Acceleration Programme. Always jam tomorrow it would seem. I do not like the expression 'ultimately'. Ultimately we are all dead. The share price is down around 4.5% this morning so the market does not like it either.

Dod

[monabri]

On the face of it, a ~20p cut in the annual dividend multiplied by the number of shares does equate to an extra £1bn per year of funds available for Cap-Ex.

http://financials.morningstar.com/ratio ... region=GBR

I do see that debt has increased steadily from £6bn in 2014 to £9.5bn Mar 21 and that shareholders have seen some dilution.

( source Simplywallstreet....partial paywall but sufficient free access to review 10 companies per month)

https://simplywall.st/stocks/gb/utiliti ... s#dividend

(I have never managed to see how SSE have funded the dividend at previous levels).

[moorfield]

I do see that debt has increased steadily from £6bn in 2014 to £9.5bn Mar 21 and that shareholders have seen some dilution.

(I have never managed to see how SSE have funded the dividend at previous levels).

That may be the clue I think. I couldn't really understand SSE's income + cashflow statements when I last looked at them (over a year ago) and came to the conclusion they were funding some of it from borrowing, and have been for years.

[Dod101]

I do see that debt has increased steadily from £6bn in 2014 to £9.5bn Mar 21 and that shareholders have seen some dilution.

(I have never managed to see how SSE have funded the dividend at previous levels).

That may be the clue I think. I couldn't really understand SSE's income + cashflow statements when I last looked at them (over a year ago) and came to the conclusion they were funding some of it from borrowing, and have been for years.

All of that is true but the cut to 60p(?) after the sale of the retail division was supposed to have sorted that out and apart from the Chairman who has just changed the same people are still in place.

And big borrowings is at least partly why they have been making these big asset sales of things like the gas network. Windfarms are all very well but over-concentration on them brings its own problems. They tell us that the returns in the last six months have been disappointing given the weather conditions over the winter.

Dod

[monabri]

I do see that debt has increased steadily from £6bn in 2014 to £9.5bn Mar 21 and that shareholders have seen some dilution.

(I have never managed to see how SSE have funded the dividend at previous levels).

That may be the clue I think. I couldn't really understand SSE's income + cashflow statements when I last looked at them (over a year ago) and came to the conclusion they were funding some of it from borrowing, and have been for years.

All of that is true but the cut to 60p(?) after the sale of the retail division was supposed to have sorted that out and apart from the Chairman who has just changed the same people are still in place.

And big borrowings is at least partly why they have been making these big asset sales of things like the gas network. Windfarms are all very well but over-concentration on them brings its own problems. They tell us that the returns in the last six months have been disappointing given the weather conditions over the winter.

Dod

The funding for "SSE's accelerated capex plan to 2026 " is coming from the shareholders in the form of a reduced dividend as SSE cannot safely increase debt further (cash flow wouldn't support it). However, if the investment is being made sooner, one would hope the Cap-Ex requirement would decrease later on. The management team kick the can down the road ( and it's your can) and with a pay cheque of £3m a year, it's a good game for the CEO.

EDIT. Are any of the management team buying..I can't see any buys by the CEO and CFO in the last 12m).

[Dod101]

I am writing to the new Chairman. It is not his fault since he only joined the Board very recently but he ought to know our views, particularly since in the 2020 Annual report they printed the Governance Code which inter alia says '.....a company's culture should ......be responsive to the views of shareholders...'

Also, 'The Board believes that long term success will be founded on sustaining dividend payments on which people depend for savings and pensions'

Dod

[daveh]

I am writing to the new Chairman. It is not his fault since he only joined the Board very recently but he ought to know our views, particularly since in the 2020 Annual report they printed the Governance Code which inter alia says '.....a company's culture should ......be responsive to the views of shareholders...'

Also, 'The Board believes that long term success will be founded on sustaining dividend payments on which people depend for savings and pensions'

Dod

Dividend was cut to ~80p after the sale of the retail business (that sale looks to have been a good choice/well timed at the moment) and was then to increase by inflation until the end of the regulatory period. They are keeping to that dividend plan that was set out at the time and are increasing by inflation until the end of 22/23. So we will get increasing dividends this year and next and then a cut to 60p. So you could say they are sticking with what they promised and then reducing once the promise has been met.

[moorfield]

So you could say they are sticking with what they promised and then reducing once the promise has been met.

That's a fair point and I suppose the lesson for HYPsters in their income planning here is to pay attention to those 5 year plan dates particularly wrt the Utilities, and assume nothing after they end.

[Dod101]

I am writing to the new Chairman. It is not his fault since he only joined the Board very recently but he ought to know our views, particularly since in the 2020 Annual report they printed the Governance Code which inter alia says '.....a company's culture should ......be responsive to the views of shareholders...'

Also, 'The Board believes that long term success will be founded on sustaining dividend payments on which people depend for savings and pensions'

Dod

Dividend was cut to ~80p after the sale of the retail business (that sale looks to have been a good choice/well timed at the moment) and was then to increase by inflation until the end of the regulatory period. They are keeping to that dividend plan that was set out at the time and are increasing by inflation until the end of 22/23. So we will get increasing dividends this year and next and then a cut to 60p. So you could say they are sticking with what they promised and then reducing once the promise has been met.

I agree that they have so far kept to their promises but they are not 'sustaining dividend payments on which people depend for savings and pensions'.

I think they would be better to bite the bullet and have a rights issue. What other company except maybe the cyclical housebuilders, has a dividend policy set in three or five year cycles? Forward for some years and then a step back and forward again. That is no way for any company to behave and certainly not for a utility. Currently down 4.4% and well deserved at that.

Dod

[Bouleversee]

I am writing to the new Chairman. It is not his fault since he only joined the Board very recently but he ought to know our views, particularly since in the 2020 Annual report they printed the Governance Code which inter alia says '.....a company's culture should ......be responsive to the views of shareholders...'

Also, 'The Board believes that long term success will be founded on sustaining dividend payments on which people depend for savings and pensions'

Dod

What they are saying is that the company is planning to become a growth stock rather than an income stock, which I should have thought was the company's prerogative. They have given us due warning so we can decide whether to stay put or invest elsewhere. SSE is/was one of my largest holdings (2650 shares) so it will mean a significant drop in income but so long as the loss of dividend is replaced by an increase in total return I am not too bothered. Even 60p is a heck of a lot better than many/most of my holdings, some of which are still paying zero or peanuts) and I certainly would not welcome a dividend paid out of unsustainable borrowings, so I am inclined to hang on. Timing the exit would be difficult and I should probably get it wrong. However, I share the concern over lack of wind (pity we can't usefully capture the amount expressed on these boards!) and need to understand how much of their business relies on that. I am just as concerned as to the risk to much needed power supplies as to SSE's financial results, however. I would not want to have a large amount of my money invested in something very heavily dependent on such an unreliable source (I have heard lack of wind mentioned several times recently) so any reassuring comments on that aspect would be welcome. (I haven't had time to study their report and other activities in detail.)

I see that the vertical drop in s.p. this morning has reduced a fair bit, which is encouraging.

Edit: As to a rights issue, it can't be assumed that all pensioners (or anyone else for that matter) would have the spare cash for that especially if invested in an ISA where there might not be capacity either, and it would be likely that a higher dividend was being paid out of their own capital. It will be interesting to see what the press has to say tomorrow.

[Dod101]

I too will most likely keep my shares but it does not stop me feeling much aggrieved at their behaviour. If they are to become a growth stock, well maybe but I doubt it. They are still just a utility. They are another of several of my shares which have cut their dividend. I now have none which are not paying at least some dividend. It is the nonsense of their pronouncements about jam tomorrow that gets me more than anything else.

I thought when they cut the dividend in 2020 that was it truly 'rebased' as they call it, but it turns out to be rebased only until the next time.

Dod