SSE PLC’s (LSE:SSE) full-year results landed where investors had expected them to, at the top end of the company’s own guidance range, and the more important signal was the reaffirmation of the medium-term trajectory that has made the FTSE 100 energy group one of the sector’s preferred infrastructure growth stories.
Adjusted earnings per share of 153.5p came in comfortably ahead of the 149.6p consensus, though group operating profit of £2.24 billion was fractionally below the £2.26 billion the market had pencilled in. The dividend rose 7% to 68.7p.
RBC Capital Markets, which rates the stock ‘outperform’ with a 3,025p target price, described the results positively, noting that SSE delivered at the upper end of its range even after absorbing a 2p per share accounting adjustment announced earlier in the month.
Consensus for the current financial year sits broadly at the midpoint of SSE’s updated guidance of 168p to 193p, adjusted for the dilutive impact of the recent equity raise, suggesting estimates have further room to drift higher if execution remains on track.
The divisional performance told a story of transition. Transmission was the clear standout, with operating profit jumping 74% to £563 million as the acceleration of Scotland’s grid buildout translated directly into higher allowed revenues.
This is the division most directly exposed to the UK’s energy infrastructure investment cycle, and the growth trajectory here is structural rather than cyclical.
Distribution’s 54% decline to £335 million was entirely expected, reflecting the reversal of one-off inflationary cost recoveries that had flattered the prior year.
Renewables edged up 4% to £1,076 million, a creditable performance given mixed wind conditions and lower hedged prices, with the initial commissioning at Dogger Bank A and delivery of the Yellow River project providing the incremental capacity to offset those headwinds.
The most significant forward-looking detail was the capital expenditure outlook. Spending totalled £3,586 million in the year just ended and is expected to increase significantly to over £5 billion in the current year, in line with the phasing of SSE’s £33 billion five-year investment plan.
Net debt of £10.1 billion implies leverage of 3.3 times net debt to EBITDA, with the company emphasising that the balance sheet remains comfortably within strong investment-grade credit ratings.
For the current year, the outlook by division suggests continued momentum. Transmission profits are expected to be significantly higher again, thermal should benefit from a step-up in contracted capacity market payments, and renewables is guided to deliver similar profits as new capacity offsets lower merchant power prices.