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SSE plc trading statement.

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idpickering
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SSE plc trading statement.

#199782

Postby idpickering » February 8th, 2019, 7:03 am

SSE plc completed the third quarter of its financial year on 31 December 2018. This Trading Statement:

· reiterates SSE's intention to recommend a full-year dividend for 2018/19 of 97.5 pence per share and to deliver the five-year dividend plan set out in May 2018;

· sets out SSE's current assessment that the Capacity Market 'standstill period' means it is unlikely to receive, or be able to recognise, contracted income from the Capacity Market until after this financial year, resulting in an estimated 6p reduction in current year adjusted earnings per share (EPS)* which takes the forecast for adjusted EPS in 2018/19 to be in the range of 64p to 69p;

· confirms the options that SSE is assessing for the future of SSE Energy Services, which remains held for disposal; and

· summarises the positive progress SSE has made with its capital investment programme for 2018/19. This is still expected to total around £1.7bn, including around £1.1bn in regulated electricity networks and renewable energy.

https://www.investegate.co.uk/sse-plc-- ... 00024370P/

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Re: SSE plc trading statement.

#199796

Postby monabri » February 8th, 2019, 8:41 am

idpickering wrote:

· sets out SSE's current assessment that the Capacity Market 'standstill period' means it is unlikely to receive, or be able to recognise, contracted income from the Capacity Market until after this financial year, resulting in an estimated 6p reduction in current year adjusted earnings per share (EPS)* which takes the forecast for adjusted EPS in 2018/19 to be in the range of 64p to 69p;


The energy suppliers were being paid by the government to keep the wheels turning in case of sudden energy demands in winter. The EU ruled this funding as state aid and illegal.

Earnings per share 69p
Dividend per share 97.5p

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Re: SSE plc trading statement.

#199820

Postby mike » February 8th, 2019, 9:33 am

monabri wrote:Earnings per share 69p
Dividend per share 97.5p


The EPS of 69P is stated as the *Adjusted EPS excludes SSE Energy Services ('held for disposal'), so it would be fairer to give the pre-announced dividend of 80p for next year in relation to the 69p.

I do grant you that even this is still rather less than impressive ...

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Re: SSE plc trading statement.

#199824

Postby Arborbridge » February 8th, 2019, 9:48 am

"· reiterates SSE's intention to recommend a full-year dividend for 2018/19 of 97.5 pence per share and to deliver the five-year dividend plan set out in May 2018;"


Hubris? Or the triumph of Hope over Adversity?

It's difficult to see how they can deliver on this promise without adversely impacting the balance sheet.
But, should I be bovvered to think this way? - a HYPer is destined to wait and see. If the dividends keep flowing, do nothing.

Arb.

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Re: SSE plc trading statement.

#199825

Postby idpickering » February 8th, 2019, 9:52 am

Arborbridge wrote:"· reiterates SSE's intention to recommend a full-year dividend for 2018/19 of 97.5 pence per share and to deliver the five-year dividend plan set out in May 2018;"


Hubris? Or the triumph of Hope over Adversity?

It's difficult to see how they can deliver on this promise without adversely impacting the balance sheet.
But, should I be bovvered to think this way? - a HYPer is destined to wait and see. If the dividends keep flowing, do nothing.

Arb.


We've got the potential Corbyne factor to keep in mind too. I hold, but am shy of buying more.

Ian.

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Re: SSE plc trading statement.

#199831

Postby OLTB » February 8th, 2019, 10:03 am

idpickering wrote:
Arborbridge wrote:"· reiterates SSE's intention to recommend a full-year dividend for 2018/19 of 97.5 pence per share and to deliver the five-year dividend plan set out in May 2018;"


Hubris? Or the triumph of Hope over Adversity?

It's difficult to see how they can deliver on this promise without adversely impacting the balance sheet.
But, should I be bovvered to think this way? - a HYPer is destined to wait and see. If the dividends keep flowing, do nothing.

Arb.


We've got the potential Corbyne factor to keep in mind too. I hold, but am shy of buying more.

Ian.


Agreed - haven't topped up SSE for a while as others have been topped up in their place. As Arb said, I'm happy to keep holding as the dividends are still being paid.

Cheers, OLTB.

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Re: SSE plc trading statement.

#199844

Postby moorfield » February 8th, 2019, 10:42 am

idpickering wrote:
· reiterates SSE's intention to recommend a full-year dividend for 2018/19 of 97.5 pence per share and to deliver the five-year dividend plan set out in May 2018;


Don't forget this includes a ~18% dividend cut!

SSE reiterated its five-year dividend plan, including the dividend cut to 80p in 2020 previously justified by the deal with Innogy. The fact that the dividend cut is maintained despite the cancellation of the deal is disappointing, since the new company in which SSE shareholders would have received shares could have paid a dividend.

http://www.morningstar.co.uk/uk/news/17 ... plans.aspx

I continue to hold but am unlikely to be buying more for several years. In the meantime, top ups elsewhere should hopefully dilute the effect of this cut on my overall portfolio income (currently SSE contributes ~7.9% :shock: ).

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Re: SSE plc trading statement.

#199961

Postby Wizard » February 8th, 2019, 4:26 pm

moorfield wrote:
idpickering wrote:
· reiterates SSE's intention to recommend a full-year dividend for 2018/19 of 97.5 pence per share and to deliver the five-year dividend plan set out in May 2018;


Don't forget this includes a ~18% dividend cut!

Is that the case? I thought the 2017/18 dividend was 94.70p (that is what Dividenddata.co.uk says anyway). What am I missing?

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Re: SSE plc trading statement.

#199988

Postby monabri » February 8th, 2019, 5:28 pm

Here's the "numbers" from dividend data


From the Half yearly report : https://www.londonstockexchange.com/exc ... 65861.html

(18% drop approx ; 80p versus 97.5p)

" For 2018/19, SSE is intending to recommend a full-year dividend of 97.5 pence per share with the interim payment related to this of 29.3 pence per share. This provides clarity in a year of transition and is not subject to the timing of either the SSE Energy Services transaction or the Domestic Gas and Electricity (Tariff Cap Bill).

· For 2019/20, SSE is planning to set the first post-transaction dividend at 80 pence per share, which reflects the impact of the changes in the SSE group expected to take effect by then. This provides a sustainable basis for future dividend growth.

· For 2020/21, 2021/22 and 2022/23 SSE is targeting annual increases in the full-year dividend that at least keep pace with RPI inflation. This reflects SSE's confidence in the quality and value of its assets and earnings and cash flows they deliver."

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Re: SSE plc trading statement.

#199995

Postby Wizard » February 8th, 2019, 5:38 pm

monabri wrote:Here's the "numbers" from dividend data


From the Half yearly report : https://www.londonstockexchange.com/exc ... 65861.html

(18% drop approx ; 80p versus 97.5p)

" For 2018/19, SSE is intending to recommend a full-year dividend of 97.5 pence per share with the interim payment related to this of 29.3 pence per share. This provides clarity in a year of transition and is not subject to the timing of either the SSE Energy Services transaction or the Domestic Gas and Electricity (Tariff Cap Bill).

· For 2019/20, SSE is planning to set the first post-transaction dividend at 80 pence per share, which reflects the impact of the changes in the SSE group expected to take effect by then. This provides a sustainable basis for future dividend growth.

· For 2020/21, 2021/22 and 2022/23 SSE is targeting annual increases in the full-year dividend that at least keep pace with RPI inflation. This reflects SSE's confidence in the quality and value of its assets and earnings and cash flows they deliver."

My bold.

Well, if this is the plan they are sticking to then I think the wording of the announcement quoted in the OP is disingenuous, given the previous announcement was for a "post transaction" dividend. As there is now no transaction is on the horizon I think the management should be obliged to make the position very clear. You are probably right, but I think management are being pretty shoddy here.

The current price represents the best opportunity to exit since September last year, maybe this is not the time to "do dick".

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Re: SSE plc trading statement.

#200002

Postby tjh290633 » February 8th, 2019, 6:04 pm

Wizard wrote:The current price represents the best opportunity to exit since September last year, maybe this is not the time to "do dick".

With an expected yield running at over 8% for the current year, I would have thought that this is an excellent time to sit on your hands.

With the failure of the anticipated demerger, nobody knows what forward dividend policy may be, or whether shareholders will receive a shareholding in the demerged or sold division, remains to be seen.

Time to stop fretting, I think.

TJH

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Re: SSE plc trading statement.

#200072

Postby idpickering » February 9th, 2019, 7:05 am

tjh290633 wrote:
Wizard wrote:The current price represents the best opportunity to exit since September last year, maybe this is not the time to "do dick".

With an expected yield running at over 8% for the current year, I would have thought that this is an excellent time to sit on your hands.

With the failure of the anticipated demerger, nobody knows what forward dividend policy may be, or whether shareholders will receive a shareholding in the demerged or sold division, remains to be seen.

Time to stop fretting, I think.

TJH


I couldn't agree more TJH. I intend to just continue hanging on to my SSE shares, and ride this out. Only if the dividend policy deteriorates with regards to the pay out going forward, would I reconsider my position.

Ian.

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Re: SSE plc trading statement.

#200093

Postby Wizard » February 9th, 2019, 11:20 am

idpickering wrote:
tjh290633 wrote:
Wizard wrote:The current price represents the best opportunity to exit since September last year, maybe this is not the time to "do dick".

With an expected yield running at over 8% for the current year, I would have thought that this is an excellent time to sit on your hands.

With the failure of the anticipated demerger, nobody knows what forward dividend policy may be, or whether shareholders will receive a shareholding in the demerged or sold division, remains to be seen.

Time to stop fretting, I think.

TJH


I couldn't agree more TJH. I intend to just continue hanging on to my SSE shares, and ride this out. Only if the dividend policy deteriorates with regards to the pay out going forward, would I reconsider my position.

Ian.

But that is the point Ian, it has!

They said they were splitting the business and cutting the dividend of the remaining business to the right size for that proportion, but also shareholders would get shares in another entity which might pay a dividend or might not but if it did not then the shares could be sold. But now they have called off the split of the business with no clear plan as what they are doing with it going forward, but are still going to pay the reduced dividend it seems. To my mind it is duplicitous for the management to not be up front about that and call a cut a cut, the result is I am less comfortable with the business due to management behaviour.

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Re: SSE plc trading statement.

#200101

Postby idpickering » February 9th, 2019, 11:56 am

Wizard wrote:
idpickering wrote:
tjh290633 wrote:With an expected yield running at over 8% for the current year, I would have thought that this is an excellent time to sit on your hands.

With the failure of the anticipated demerger, nobody knows what forward dividend policy may be, or whether shareholders will receive a shareholding in the demerged or sold division, remains to be seen.

Time to stop fretting, I think.

TJH


I couldn't agree more TJH. I intend to just continue hanging on to my SSE shares, and ride this out. Only if the dividend policy deteriorates with regards to the pay out going forward, would I reconsider my position.

Ian.

But that is the point Ian, it has!

They said they were splitting the business and cutting the dividend of the remaining business to the right size for that proportion, but also shareholders would get shares in another entity which might pay a dividend or might not but if it did not then the shares could be sold. But now they have called off the split of the business with no clear plan as what they are doing with it going forward, but are still going to pay the reduced dividend it seems. To my mind it is duplicitous for the management to not be up front about that and call a cut a cut, the result is I am less comfortable with the business due to management behaviour.


Fair enough Wizard. Maybe I should've slipped in the words "even further" between the words "deteriorates" and "with", that might've been better. I'm still going to do as Terry suggested,
Time to stop fretting, I think.


Ian.

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Re: SSE plc trading statement.

#200108

Postby kempiejon » February 9th, 2019, 12:26 pm

tjh290633 wrote:
Wizard wrote:The current price represents the best opportunity to exit since September last year, maybe this is not the time to "do dick".

With an expected yield running at over 8% for the current year, I would have thought that this is an excellent time to sit on your hands.

With the failure of the anticipated demerger, nobody knows what forward dividend policy may be, or whether shareholders will receive a shareholding in the demerged or sold division, remains to be seen.

Time to stop fretting, I think.

TJH

Indeed. 8% this year is pretty good and if they stick to the stated amount of 80p that's still 6% next year with an inflation linked promise. I'm miffed it looks like they will reduce my income for a few years but there have been worse corrections in my portfolio and as one of dozens of shares shouldn't be a big deal
Here's what SSE last said before the demerger fell down. http://sse.com/investors/reportsandresults/
" SSE’s plan for the dividend for the five years to 2023 is as set out in May 2018: • For 2018/19, SSE is intending to recommend a full-year dividend of 97.5 pence per share with the interim payment related to this of 29.3 pence per share. This provides clarity in a year of transition and is not subject to the timing of either the SSE Energy Services transaction or the Domestic Gas and Electricity (Tariff Cap Bill). • For 2019/20, SSE is planning to set the first post-transaction dividend at 80 pence per share, which reflects the impact of the changes in the SSE group expected to take effect by then. This provides a sustainable basis for future dividend growth. • For 2020/21, 2021/22 and 2022/23 SSE is targeting annual increases in the full-year dividend that at least keep pace with RPI inflation. This reflects SSE’s confidence in the quality and value of its assets and earnings and cash flows they deliver. "

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Re: SSE plc trading statement.

#200261

Postby Gengulphus » February 10th, 2019, 9:53 am

Wizard wrote:Well, if this is the plan they are sticking to then I think the wording of the announcement quoted in the OP is disingenuous, given the previous announcement was for a "post transaction" dividend. As there is now no transaction is on the horizon I think the management should be obliged to make the position very clear. You are probably right, but I think management are being pretty shoddy here.

I suspect it's probably more that the position simply isn't all that clear, even to the management. I base that on the following quote from Friday's RNS:

"SSE believes that SSE Energy Services will be best positioned to build on this strong performance in a future outside of the SSE group. With that in mind, SSE is continuing to build on the significant work done to date to separate SSE Energy Services as an independent, self-sufficient entity within the group, in preparation for its future outside it.

Future options are now being assessed for SSE Energy Services. These include: a standalone demerger and listing on either the premium or the standard listing segment of the Official List; a sale; or an alternative transaction. If none of the other options is viable SSE may retain Energy Services as a separate, ring-fenced business within the SSE group that would be expected to be cash flow positive. These options are being assessed, taking into consideration the best interests of customers, employees and shareholders, and with the support of external advisers. SSE will provide a further update on the progress of its assessment of the options by the end of March 2019.
"

In the light of that, I think they're being pretty clear, as long as one reads and considers everything they've said put together. With my bold, they said in their initial summary of the RNS that they reiterate their "intention ... to deliver the five-year dividend plan set out in May 2018". That five-year plan was in their final results for 2017/18 and included a statement that (again with my bold) "For 2019/20, SSE is planning to set the first post-transaction dividend at 80.0 pence per share, which reflects the impact of the changes in the SSE group expected to take effect by then." and monabri's link and quote above says that that was repeated completely unchanged in their interim results. And my quote above indicates that they still intend to dispose of SSE Energy Services. Keeping it within the SSE group is a possible outcome but very much a backstop - if I may use that word without contravening TLF's policy on bad language! ;-}

Putting those together, they still intend for there to be a transaction in which they dispose of SSE Energy Services, for that transaction to be done in the fairly near future (since they're implicitly saying that the 2019/20 dividend is intended to be post-transaction) and for the first post-transaction dividend to be reduced from the current level to 80p to reflect the fact that SSE Energy Services and its earnings have been disposed of.

There will be compensation for that loss of earnings and dividends. It's basically that between them, shareholders will own whatever value SSE obtains for the disposal. Just how much that value is likely to be is open to question, of course, and there is at least one conceivable route by which it ends up as zero. There are also conceivable routes by which it might be nonzero, but subsequently get lost - e.g. a disposal for cash, which the company then uses for what eventually turns out to be an ill-considered acquisition. But none of those will be what the company intends to do! - which is something the RNSes don't state, but also don't need to because it's an implicit part of being a public company at all.

It is however pretty clear from my quote above that it is not currently clear what form the disposal will take - not just unclear to us, but also unclear to the directors. And that affects how shareholders are compensated for the loss of earnings and dividends from the disposal will take - for instance, for a standalone demerger and listing, it's clearly that they'll then own shares in the demerged company (which hopefully will give them back the lost earnings and dividends), while for a sale for cash, it might be a special dividend (that shareholders can reinvest as they feel fit to obtain replacement earnings and dividends if they want), a share buyback or tender offer (that will reduce shares in issue and so increase the EPS represented by the remaining earnings and thus the dividends per share fundable from them), the acquisition of some other business (hopefully providing replacement earnings / dividend-funding ability) or doubtless various other possibilities.

So it seems pretty clear to me that the directors cannot currently be clear about how shareholders will be compensated for the expected loss of earnings and dividends from the disposal, if it happens. They presumably could be clear about the corresponding compensation if it doesn't prove possible and SSE retains SSE Energy Services, but (at least IMHO) they're quite entitled to assume that shareholders know that intentions can change and are sometimes forced to by circumstances: if they can't dispose of SSE Energy Services, the "transaction" they're talking about won't exist and it will be impossible for them to deliver their intention about the "first post-transaction dividend", because there will be no such thing as the "first post-transaction dividend"! It might turn out that in that event, they decide to make their dividend for 2019/20 be 80p anyway - but if it does, that will be the real dividend-cutting decision, not last year's results or this trading statement. (Something similar goes for some possible cases in which they do dispose of SSE Energy Services, by the way - e.g. if they sell it for cash but decide both to retain the cash rather than returning it to shareholders and to stick to their intention to make the 2019/20 dividend 80p rather than restoring its current level.)

So I'm not excluding the possibility that they'll end up using all this business about disposing of SSE Energy Services as a smokescreen for an 18% dividend cut - just saying that they haven't done it yet. What they have said and done seems entirely consistent with the possibility that they're preparing such a smokescreen, but also entirely consistent with the possibility that they're not - so basically it offers no hint either way that I can see about whether they are.

I would personally be a bit surprised if they are intending to do so, on the grounds that an 18% cut is quite a bit below the normal level for deliberate dividend cuts (as opposed to dividend reductions caused by exchange rate fluctuations, rights issue adjustments, etc) - I would generally expect directors who decide that their company needs to cut its dividend to want a more substantial one, if only to get all the bad publicity over at once. Not so surprised that I feel I can completely dismiss the possibility, especially given the 'stealth' aspect of cutting the dividend that way. But surprising enough to make it pretty unlikely IMHO, and I generally don't spend my time on pretty unlikely possibilities beyond that needed to establish to my satisfaction that they are pretty unlikely. Especially when "wait for the possibilities to narrow down and then see" seems an entirely viable approach to take - especially when there's good reason to believe that they will narrow down in the short term, such as the expected update by the end of March (which is the short term as far as share investments are concerned, even though it is highly likely to be an eternity in politics!).

One final comment: what I've said above about just what SSE have said might well strike some as a rather pedantic / legalistic way of looking at it. But what companies say in RNSes is very much a legal / regulatory matter, and I'd be pretty certain that it will have been carefully vetted by the company's lawyers - who will take a rather pedantic / legalistic approach to it. That includes doing their best not to say more than is required by the laws and regulations, especially about matters that might come back to bite them. In particular, words like "expects", "intends", "commits" or "will" are likely to have been looked at pretty carefully by the company, especially with regard to not saying anything stronger than is required. Readers who don't take care to look at them similarly are liable to see incorrect 'implications' in RNSes that the company's lawyers have actually taken care to ensure are not there - i.e. whose origins are in the readers' own minds rather than the RNSes. Or much more briefly, it's a good idea to read RNSes with an eye on not inadvertently misleading yourself about what the company has said!

Gengulphus

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Re: SSE plc trading statement.

#200339

Postby csearle » February 10th, 2019, 3:53 pm

Gengulphus wrote:
an RNS wrote:These include: a standalone demerger and listing on either the premium or the standard listing segment of the Official List; a sale; or an alternative transaction.
Is there a list of companies that have a premium listing of which you know?

Cheers,
Chris

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Re: SSE plc trading statement.

#200424

Postby Gengulphus » February 10th, 2019, 10:15 pm

csearle wrote:
Gengulphus wrote:
an RNS wrote:These include: a standalone demerger and listing on either the premium or the standard listing segment of the Official List; a sale; or an alternative transaction.
Is there a list of companies that have a premium listing of which you know?

I don't know of a full list of companies with premium listings - but I do know of two resources that you might well find useful.

First, if you look at the "Ground Rules" document for the FTSE UK Index Series, you'll find that it covers quite a few indices, that in particular include the FTSE 100, the FTSE 350 and the FTSE All-Share (the full list is on its page 3), and contains the following rule on page 9:

"4.1.1 Only Premium Listed Equity Shares, as defined by the Financial Conduct Authority in its Listing Rules Sourcebook, which have been admitted to trading to the London Stock Exchange with a Sterling denominated price on SETS are eligible for inclusion in the FTSE UK Index Series."

So any FTSE 350 company has a premium listing, any company that was formerly in the FTSE 350 but has dropped out of it only because its market cap has fallen is highly likely to still have a premium listing (which together mean that any company that is within this board's guidance is highly likely to have a premium listing), and any list of FTSE All-Share constituents is a list of companies with premium listings - just not necessarily a full list.

The second is that the London Stock Exchange page for a company tells you what type of listing it has - look down its right hand column for the block titled "SECURITY INFORMATION", and about halfway through that block you'll find a "Listing category" item. For example, the page for South32 says that it's got a standard listing. That makes it the only exception I'm aware of to my above statement about companies which meet this board's guidance being highly likely to have premium listings - I believe it does meet the guidance because it's an existing share in some HYPers' HYPs due to its demerger a few years back from BHP Billiton (now BHP Group), which definitely both did and does meet the guidance.

That allows one to check companies' listing types one-by-one - but using it to list all companies with premium listings would be liable to be very cumbersome!

I should possibly add that I've never really felt a serious need to know which type of listing a company has - I only know about the above because one of my smallcap holdings put a resolution to its shareholders some time back proposing that it should change its listing from a premium one to a standard one, I wondered what on earth the resolution was really about and so investigated. The reason they gave for the resolution was that a standard listing would be cheaper for the company to maintain, and IIRC my investigations concluded that the regulatory protections for shareholders of a standard listing were somewhat weaker. But I don't remember what the differences were, I don't remember ever checking up on whether the resolution was passed, and by now I don't even remember which of my smallcap holdings it was - so I clearly wasn't greatly concerned about what I learnt!

Finally, if SSE does end up demerging SSE Energy Services, I don't see any reason either why it might need to be disqualified from FTSE index membership or why they might want to disqualify it, so I would be distinctly surprised if they didn't go for a premium listing. I suspect their mention of a standard listing is basically there just to avoid appearing to rule options out at this stage.

Gengulphus

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Re: SSE plc trading statement.

#200477

Postby tjh290633 » February 11th, 2019, 10:01 am

Regarding S32, it is not included in the FTSE100, despite being eligible in terms of capital value.

It has an Australian domicile, which may be the reason.

BHP plc itself is a UK company, while its alter ego BHP Ltd is Australian.

TJH

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Re: SSE plc trading statement.

#200805

Postby Gengulphus » February 12th, 2019, 11:47 am

tjh290633 wrote:Regarding S32, it is not included in the FTSE100, despite being eligible in terms of capital value.

It has an Australian domicile, which may be the reason.

As I said, South32 has only got a standard listing, which makes that the obvious direct reason for it not being in any of the FTSE UK indices under the rule 4.1.1 that I quoted. I intended to make the words "the page for South32" in what I said about the London Stock Exchange pages telling one about the listing type be a link, but seem to have neglected to do so - fixed here! I should probably also have said that the LSE pages are the best way I've found of checking an individual company's FTSE index membership.

I don't know the full criteria for getting a premium listing rather than just a standard listing, but the resolution I mentioned in my last post did make it clear to me that one of them is simply that the company is willing to pay for it! And the fact that the fuller description of the shares in the LSE page is "S32 SOUTH32 LIMITED ORD NPV (DI)", in which the "DI" stands for "Depository Interest", also suggests that South32 may well not be willing to pay all that much for having a London listing - as I understand it, the basic point of a foreign company using depository interests is to reduce various regulatory compliance costs and problems.

I'd be pretty certain that being domiciled abroad has quite a bit to do with it, but the fact that Petrofac is domiciled in Jersey and is in the FTSE 350 says that not being domiciled in the UK (the Channel Islands and Isle of Man are not part of the UK) does not automatically disqualify a company from the FTSE 350. (I also thought of Royal Dutch Shell as a possible example, but while the company is definitely tax-resident in the Netherlands and incorporated in the UK, I haven't found anything about its domicile...)

Gengulphus


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