SSE PLC (SSE): Expects A £100 Million Drop In Networks’ Operating Profit, Keeps Dividends Inflation-Protected

High-yielding electric utility SSE PLC (LON:SSE) expects to deliver adjusted (excluding one-offs) earnings per share between 122p and 125p for FY’17, ending 1 April 2017, well beyond its prior guidance of 120p. The company said its wholesale division had benefited due to improvement in the energy portfolio management, thermal generation and gas production, while networks division’s operating profit also grew as growth in electricity distribution (contributes nearly 20% to group’s pre-tax operating profit) overshadowed the drop in operating profits of electricity transmission (contributes nearly 15% to pre-tax operating profits) and a reduced contribution from Scotia Gas Networks (SGN) as SSE liquidated a big chunk of its SGN-stake late last-year. “The operating environment has presented SSE with a number of complex issues to manage, but in this financial year we have been able to offset the impact of disappointing renewable energy output caused by drier and less windy weather conditions”, said SSE finance director Gregor Alexander.
SSE – A Solid Dividend Payer
While indicating a better than expected performance during FY’17, SSE provided a dim outlook for the upcoming fiscal as it expects base revenue in electricity transmission to drop by £40 million; however, it expects to recover the lost ground over the next three years. SSE’s 16.7% liquidation in SGN stake will further bring down networks’ operating profits by nearly £20 million. On a comparable basis, SSE expects £100 million dollar hit to the network-division’s operating profits. However, despite that, SSE, a popular dividend champion with nearly 6% yield, said full-year dividend will at least reflect RPI inflation adjustment to the tune of 2%. “SSE is a resilient business and we will continue to focus on securing maximum value from our portfolio of Wholesale assets, achieving further efficiencies and customer service improvements in our Networks businesses, responding positively to competition in our Retail markets and creating long-term value through investment of around £1.7bn in 2017/18”, added Mr Alexander, laying out the capital expenditure budget, 45% of which will go to economically-regulated electricity networks and nearly 20% in government-mandated renewable sources of energy.

Imperial Brands PLC (LON:IMB) to experience a big currency boost

One of the leading tobacco companies globally, IMB said performance in the half-year to 30 March 2017 is on track to meet expectations as it stands to gain nearly 13%–14% at existing exchange rates in profits for the half-year. IMB said a nearly £300 million additional investment towards its Growth and Specialist brands, along with targeting key markets, to drive long-term growth would weigh more on the first-half results; thus, it expects a stronger second-half (ends Sep. 30) performance on a constant currency basis. IMB currently yields 4%.