SSE - Trading Statement

[idpickering]

In its Trading Statement on 19 July 2018 SSE plc stated that dry, still and warm weather in the financial year so far and persistently high gas prices had negatively impacted its adjusted operating profit in Q1 2018/19 by around £80m compared with plan. It also said that this would potentially impact on its full-year results, dependent on the range of factors that apply in its market-based businesses, in which it said Energy Portfolio Management is a major influence.

First five months

SSE has now completed its assessment of its financial performance in the first five months (to 31 August 2018) of the financial year and what it is expected to mean for its businesses for the remainder of the financial year.

Relatively dry, still and warm weather has continued as have persistently high gas prices. This has continued to result in a higher cost of energy than expected, lower than expected output from renewable sources, lower volumes of energy being consumed and a negative impact in relation to Energy Portfolio Management.

SSE's adjusted operating profit for the first five months of the financial year has therefore been negatively affected by around £190m compared with plan. The net impact of higher than expected gas prices and other commodity price changes has accounted for just under half of this; with the impact of the weather accounting for most of the remainder.

And later;

Dividend for 2018/19 and beyond

SSE continues to expect to recommend a full-year dividend of 97.5 pence per share for 2018/19 and to deliver the five-year dividend plan set out in May 2018.

https://www.investegate.co.uk/sse-plc-- ... 00054794A/

Could be a buying opportunity on market opening due to this less than impressive trading statement.

Ian.

[Arborbridge]

I think that will count as a profit warning.

One of those occasions when I topped up at the wrong moment: cheap dealing day was Monday just gone.


Arb.

[monabri]

Profits halved.....3% divi increase.

[idpickering]

I last topped up in January this year, and I'm in no rush to buy more, despite the 8% decline in SP as of now. Yes you read that right. 8% down!

I'm tempted to dump them, but that would only make my 19% loss in capital on them, excluding dividends, a reality. Having said that, being contrarian has worked for me in the past (RSDSB top up Jan 2016).

No-one said HYPing was easy.

Ian.

[CommissarJones]

Feeling rather relieved that I sold my SSE shares last month. There were just too many question marks around this one for me, at both company and sector levels. I bought the stock in September 2009 and topped up in May 2010.

[absolutezero]

I last topped up in January this year, and I'm in no rush to buy more, despite the 8% decline in SP as of now. Yes you read that right. 8% down!

I'm tempted to dump them, but that would only make my 19% loss in capital on them, excluding dividends, a reality. Having said that, being contrarian has worked for me in the past (RSDSB top up Jan 2016).

No-one said HYPing was easy.

Ian.

Factor in your dividends and what's your total return?

PM Corbyn ain't far away as things stand at the moment.
Even if he somehow isn't, the Blues are taking bits of his policies. Price caps etc.
Not that I am trying to influence you.

[idpickering]

Factor in your dividends and what's your total return?

PM Corbyn ain't far away as things stand at the moment.
Even if he somehow isn't, the Blues are taking bits of his policies. Price caps etc.
Not that I am trying to influence you.

Thanks for your input absolutezero. Having just worked it out, including dividends received since my first purchase of SSE on 29 Apr 2008, my total return is 26% up. This aspect is a welcome reminder that we're all about dividends here, and capital returns are to be ignored, and immaterial.

In short, I'm going to do nothing with my SSE shares, but just accept the fact that they're not a perfect outfit/HYP share. Time to sit outside and enjoy the beautiful view from my decking in Orkney.

Ian.

[absolutezero]

Factor in your dividends and what's your total return?

PM Corbyn ain't far away as things stand at the moment.
Even if he somehow isn't, the Blues are taking bits of his policies. Price caps etc.
Not that I am trying to influence you.

Thanks for your input absolutezero. Having just worked it out, including dividends received since my first purchase of SSE on 29 Apr 2008, my total return is 26% up. This aspect is a welcome reminder that we're all about dividends here, and capital returns are to be ignored, and immaterial.

I did this with all my holdings after a good clearout of anything political (Utilities) or anything I think is a failing/dying company (like Pearson) and it's quite nice to see how things are.
I'd not say capital is immaterial. Carillion, anyone?

In short, I'm going to do nothing with my SSE shares, but just accept the fact that they're not a perfect outfit/HYP share. Time to sit outside and enjoy the beautiful view from my decking in Orkney.

Ian.

Quite! More to life than shares.

[Gengulphus]

I did this with all my holdings after a good clearout of anything political (Utilities) or anything I think is a failing/dying company (like Pearson) and it's quite nice to see how things are.

When did you do that clearout, and what do you mean by "how things are"? (Possibilities for the latter include "what the remaining companies' future prospects look like at present", "how the remaining companies have been doing since the clearout", "how the remaining companies were doing before the clearout" and probably others.)

Gengulphus

[Julian]

SSE continues to expect to recommend a full-year dividend of 97.5 pence per share for 2018/19 and to deliver the five-year dividend plan set out in May 2018.

Horrible trading update but still maintaining its previously announced divi plan through to 2023. To me this feels closer to a bond than a share - a bond paying with a very high yield on current market value but with a capital value that is going to trend downwards towards some much lower value in 2023 when a sort of redemption event occurs, i.e. a serious rebasing (euphemism for cut) of the dividend going forward. It's not quite a bond either, given all the political uncertainties around the sector and the possibility that at any time it could abandon the current 5 year divi plan, but it certainly doesn't feel anything like a Unilever, a BAE or a Brit-Am Tobacco share to me (to pick 3 somewhat random examples of other shares that I own).

I do hold, and I suspect that unwillingness to forsake the current high payouts through to 2023 plus my Dorisian leanings might keep me on board, but I definitely won't be doing any topups, it's actually a strong contender to win my share-least-likely-to-get-a-topup prize. I'm in it for the long term and this one seems as if it might have some very dark clouds on the 2023 horizon if not before.

- Julian

[absolutezero]

I did this with all my holdings after a good clearout of anything political (Utilities) or anything I think is a failing/dying company (like Pearson) and it's quite nice to see how things are.

When did you do that clearout, and what do you mean by "how things are"? (Possibilities for the latter include "what the remaining companies' future prospects look like at present", "how the remaining companies have been doing since the clearout", "how the remaining companies were doing before the clearout" and probably others.)

Gengulphus

Did the clearout earlier on this year. February March ish.

Decided to get rid of anything that was occupying my thoughts too much or keeping me awake, be that because of the threat of nationalisation (keeping me awake), too much duplication (did I need 5 mining companies?) or any companies that I decided were 'crappy' on other grounds (debt, dying business model).

The companies I now hold are typically ones that ought to be around in 50 years' time.
In other words,
* they provide a service where the Internet isn't going to each their lunch (like I expect will happen with Pearson - digital text books- They're never going to be copied and shared about are they?),
* they have a wide moat (be that brands like Unilever or huge set up costs like Shell).
* high ROCE
* decent dividend history
* unlikely to be nationalised should you-know-who get elected - and if they do decide to nationalise the likes of Greene King or Astra Zeneca then we have worse things to worry about.

[TUK020]

Did the clearout earlier on this year. February March ish.

Decided to get rid of anything that was occupying my thoughts too much or keeping me awake, be that because of the threat of nationalisation (keeping me awake), too much duplication (did I need 5 mining companies?) or any companies that I decided were 'crappy' on other grounds (debt, dying business model).

The companies I now hold are typically ones that ought to be around in 50 years' time.
In other words,
* they provide a service where the Internet isn't going to each their lunch (like I expect will happen with Pearson - digital text books- They're never going to be copied and shared about are they?),
* they have a wide moat (be that brands like Unilever or huge set up costs like Shell).
* high ROCE
* decent dividend history
* unlikely to be nationalised should you-know-who get elected - and if they do decide to nationalise the likes of Greene King or Astra Zeneca then we have worse things to worry about.

Absolute Zero,
I would love to see your portfolio now, and a list of what you cleared out, and for each of these, why.
THe Trump trade war escalation is making me feel that it is time to batten down the hatches for some rough weather.
Hope this wouldn't involve too much. Probably best on a new thread, though, as this is straying from the subject matter
tuk020

[Markblox]

I last topped up in January this year, and I'm in no rush to buy more, despite the 8% decline in SP as of now. Yes you read that right. 8% down!

I'm tempted to dump them, but that would only make my 19% loss in capital on them, excluding dividends, a reality. Having said that, being contrarian has worked for me in the past (RSDSB top up Jan 2016).

No-one said HYPing was easy.

Ian.

It's not really a loss though is it, just a lower valuation. It only becomes a loss if the shares are sold. I know I'm stating the obvious but think it's worth pointing out that valuations change over time.
My own change of valuation is 23.66% as of today, since I bought.

[idpickering]

It's not really a loss though is it, just a lower valuation. It only becomes a loss if the shares are sold. I know I'm stating the obvious but think it's worth pointing out that valuations change over time.
My own change of valuation is 23.66% as of today, since I bought.

Thanks for your input Markblox, and I agree with your comment above. See my comment below from further up this thread;

I'm tempted to dump them, but that would only make my 19% loss in capital on them, excluding dividends, a reality.

In the end I did nothing today with any of my holdings, and that's how it's going to stay.

Ian.

[monabri]

Good job BATS & IMPS were up ~6% and ~3% today ( along with increases in BP, RDSB,GNK, PFC* and GFRD*)...more importantly, there has been no mention of "cut" w.r.t. dividends.



* not common HYP shares I know!

[moorfield]

Continuing to hold and happy to live with the noise until SSE becomes McNationalGrid. I'll probably dump SENpower when that arrives, unless it announces an unambiguous divi policy from the outset. I'm not topping up any utes anyway until Corbyn&McDonnell are dumped after the next general election or labour leadership contest, which ever happens first.

[Dod101]

It's not really a loss though is it, just a lower valuation. It only becomes a loss if the shares are sold. I know I'm stating the obvious but think it's worth pointing out that valuations change over time.

That is a nice bit of kidology. It is still a loss if the valuation is lower (than from whatever your previous valuation point was ) It is though 'just' an unrealised loss.

Valuations change over time, sometimes resulting in a loss and sometimes a profit. There is market noise and that is maybe what you mean, but sadly SSE 's finances appear stretched at the moment anyway, and the sort of shortfall mentioned in their trading statement usually results in more than market noise. Today it resulted in a more than 8% fall in the share price. Capital does not matter?

I suspect that reality will dawn on the Directors of SSE rather sooner than we think and the dividend will be rebased well before any spin off of the retail arm. I still hold some.

Dod

[daveh]

Good job BATS & IMPS were up ~6% and ~3% today ( along with increases in BP, RDSB,GNK, PFC* and GFRD*)...more importantly, there has been no mention of "cut" w.r.t. dividends.



* not common HYP shares I know!

I hold both, Petrofac is up ~50% including divis and GFRD is up ~10% including divis, but showing a small capital loss without the dividends.
For comparison SSE is showing a 250% gain including dividends, dividends received are almost double the purchase cost of the shares. So its not been a bad purchase, but it isn't one I'm topping up at the moment. I have worries about utilities being in Corbyn's sight and the fact that the dividend may not be sustainable long term. For a while it has also been disbarred from top-up's because it makes up rather too much of my HYPs income and capital, the fall back in the share price means it is no longer disbarred on capital grounds though it still is on income grounds.

[Dod101]

I have held SSE for a very long time and I daresay I am probably still up but it is another of those shares which, in recent years, has done nothing or gone backwards on the capital front and again like some other shares the dividends are being dearly bought.

I would not buy today irrespective of what your HYPTUSS chart says. Trading conditions are not great, its finances appear stretched and then there is Corbyn. I will probably sell my remaining holding before long if the price recovers a bit.

Dod

[IanTHughes]

Capital does not matter?

If by “capital” you mean the valuation attributed by the market to my HYP at any point in time, then no, “capital” does not matter. If one were aiming to raise a specific amount of "capital" at a specific point in time, perhaps to purchase an annuity, then of course “capital” would matter. The aim of the HYP Strategy, however, is to build a sustainable and growing income stream while leaving the “capital” alone.

By the by, if an HYP achieves its “increasing income” aim, the “capital” will most probably do well too.

Getting back to SSE Plc (SSE), and to those of you that worry about your HYP's “capital”, rather than concentrating on creating an increasing income, what exactly are you bleating about? An HYP is, or at least should be, made up of a diversified group of shares, across multiple Business Sectors and even different Industry Groups. The exact amount of diversification is a personal choice but should not mean much more than 7% of the whole HYP “capital” being tied to SSE. So even on a day that the price of SSE went down over 8%, a properly diversified HYP with a holding of SSE at the maximum value allowed, would have declined in value by at most 1%, hardly a murmur let alone noise! In point of fact, my HYP “capital” increased yesterday!

Furthermore, what do you intend to do about it, now that your “capital” has declined by 1%? Sell SSE?

I suspect that reality will dawn on the Directors of SSE rather sooner than we think and the dividend will be rebased well before any spin off of the retail arm.

Please do tell us, what it is that you think you know, that SSE’s Board of Directors have yet to wake up to? Why do you believe the dividend is unsustainable?

Or are you simply expressing your own forecast for the future?


Ian