ii view: SSE shares surge as focus shifts to transmission networks

Strategic update and first-half results to 30 September

• Planned five-year investment programme of £33 billion
• Adjusted earnings per share down 29% to 36.1p per share
• Interim dividend of 21.4p per share, up from last year’s 21.2p per share
• Adjusted net debt and hybrid capital of £11.4 billion, up from £9.8 billion

Chief Executive Martin Pibworth said:

"Today's transformational investment plan will help build a cleaner, more secure and more affordable energy system. Upgrading the UK electricity network offers a once-in-a-generation opportunity for accelerated investment that is underpinned by secure UK Government regulatory frameworks. 

"It will unlock much-needed growth across the wider economy and support thousands of jobs over the course of the plan. Our focused, disciplined and comprehensively funded investment plan will improve lives, whilst creating sustainable value for our shareholders and society for decades to come."

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ii round-up:

SSE (LSE:SSE) today announced a major five-year investment plan alongside first-half results, with the group looking to increase its focus on potentially higher profit generating transmission networks.

Investment totalling £33 billion is being made through to the financial year 2029/2030, with £27 billion of investment in regulated transmission networks behind a forecast compound annual growth rate (CAGR) of 7-9% and potentially taking adjusted earnings up to between 225p and 250p per share. That compares with last year's unadjusted 160.9p per share.

Shares in the FTSE 100 company rose 10% in UK trading having come into this latest news up by almost a quarter so far in 2025. That’s similar to both the FTSE 100 index and shares for UK and US power transmission company National Grid (LSE:NG.) year-to-date.

SSE operations include renewable and traditional gas-powered generation plants as well as transmission and supply networks across the UK. 

An equity fundraising of £2 billion is being made to help bankroll the major five-year investment programme. 

An interim dividend of 21.4p per share, payable to eligible shareholders on 30 January, is up from last year’s 21.2p per share. SSE will continue to target growth in the annual dividend payment of between 5% and 10%.

Typical seasonal averages resulted in adjusted earnings per share for the first half to late September falling by 29% to 36.1p per share. SSE continues to expect annual adjusted earnings for both this current financial year and the next to be in line with management’s forecasts.

Broker UBS reiterated its ‘buy’ stance on the shares post the news. A third-quarter trading update is expected early February with full-year results scheduled for 28 May. 

ii view:

Formed via the merger of Southern Electric and Scottish Hydro Electric, SSE today employs over 15,000 people. Regulated Networks accounted for around two-thirds of adjusted operating profits during this latest half year. Already the UK biggest generator of renewable power, operations include more than 65 turbines at its Dogger Bank operation off the coast of Yorkshire. Other existing or under construction renewable operations also includes facilities in Ireland, France, Spain and Italy.

For investors, adjustments to taxes and capital allowances can impact business, with a UK Budget pending. Renewable energy production is subject to weather conditions with related adjusted operating profit down 18% during this latest period. Negotiations with the UK regulator offer regular periodic uncertainty, while environmental considerations include potential new pylons across green fields and near homes.  

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To the upside, existing and to be extended transmission networks offer a relatively high degree of profit predictability given regular energy usage. A diverse portfolio of generating and other assets are held. The bulk or 55% of this major investment programme is being funded from day-to-day operations and cashflows, while dividend increases of between 5% and 10% will continue to be pursued. 

In all, and with strong cashflows backing dividend payments, this major UK utility company looks to remain worthy of its place in many already diversified investor portfolios. 

Positives

• Expanding asset base
• Attractive dividend yield (not guaranteed)

Negatives

• Subject to regulatory rulings
• Previous target of government windfall tax  

The average rating of stock market analysts:

Buy