SSE PLC (LSE:SSE) opted to focus on renewable energy investments rather than a hefty jump in profits in Wednesday’s results, a move picked up by analysts after the wing actually underperformed last year.
“SSE knows the drill,” AJ Bell analysts said, “an energy company reporting bumper profit is likely to draw fire right now”.
However, the FTSE 100-listed power firm’s focus on renewable investments was dubbed “bold and admirable” by Hargreaves Lansdown analyst Aarin Chiekrie, who pointed to worse-than-expected generation from renewables due to poor weather conditions last year.
The profits were much lower than expected by Peel Hunt, which had forecast SSE Renewables would generate a £720mln operating profit, rather than the £580mln actually recorded.
Despite this, SSE ramped up plans to invest billions in net zero infrastructure, now earmarking £18bn for the five years to 2027 and £40bn over the decade.
Overall SSE penned an 89% rise in pre-tax profit to £2.18bn during the year to March, alongside earnings per share of 166p, a 75% jump on the previously recorded 94.8p.
SSE Thermal, which covers activities such as energy-from-waste and energy storage activities, accounted for £1.2bn of that, with the Transmission and Distribution businesses each bringing in £372mln and £382mln respectively.
“As we move towards a net-zero world, the need for investment in renewables and networks is clear, and SSE’s ahead of the pack in this regard,” Chiekrie explained.
“But the transition will be costly, and it’ll likely be a long road until renewables can generate cash more reliably, which adds a layer of risk to SSE in the near-to-medium term.”
Peel Hunt analysts dubbed the results “strong” nonetheless, rating SSE a 'buy' and offering a share price target of 2,060p, up 10% on Monday’s close.
Noting utilities were “conscious of accusations of profiteering,” AJ Bell analyst Russ Mould added, “SSE [was] careful to flag its record capital investment budget, the acceleration of its drive to net zero and the planned dividend cut for the coming fiscal year”.