Shares in utilities firm SSE (SSE) fell 4% to £15.91 after failing to commit to a more dramatic restructuring of the business.
SSE announced plans to sell 25% of its grid business to help fund a £12.5 billion investment in clean energy projects out to 2026. This stopped short of the break-up of the group activist investor Elliott is reportedly pushing for.
Elliott’s apparent thinking is that the renewables arm would attract a higher valuation as a standalone business and some of SSE’s peers are pursuing or actively looking at similar moves.
SSE’s argument is that splitting the businesses up would result in a loss of scale, a weaker credit position, result in £200 million of one-off costs and the loss of things like shared skills and diversification benefits.
Elsewhere the company said its first-half profit more than doubled after higher earnings at its distribution and transmission businesses offset a loss at its renewables unit, somewhat underpinning SSE’s arguments for remaining a diversified business.
RENEWABLES OUTPUT DROPS
Pre-tax profit for the six months through September increased to £1.69 billion, up from £779.4 million year-on-year, and also benefited from mark-to-market revaluation gains on operating derivatives. Adjusted pre-tax profit rose 30% to £174.2 million.
This came despite a 25% reduction in output from its renewables arm due to lower wind speeds.
SSE declared an interim dividend of 25.5p per share, up 4.1% from 24.4p year-on-year and in line with its five-year dividend plan to 2023.
Looking forward, SSE said it expected to report full-year adjusted earnings per share 'at least in line' with consensus of analysts’ forecasts of 83p.
‘The group has enjoyed a strong start to the second half of the year, with renewables volumes above plan in October, and thermal and hydro plant in particular achieving strong prices in the market,’ it said.
Adjusted earnings per share in the first half rose 44% to 10.5p, just above SSE’s guided range of between 7.5p and 10p.
