SSE PLC - On-track to Achieve Key Financial Goals and Taken Stake in Seagreen 1 Offshore Wind Farm

SSE Plc (LON: SSE) is an integrated energy utility group, with investments and operations across Ireland and UK.

On 17^th June 2020, the Company will release its preliminary results for the year ended 31 March 2020.

Recent News
On 3^rd June 2020, the Company said SSE renewables has entered into an agreement to sell a 51 per cent stake in its Seagreen 1 offshore wind farm project to Total for an initial consideration of GBP 70 million. SSE renewables have reached the final close on the Season 1 offshore wind project, and it will be Scotland’s largest wind farm once complete with a capacity of 1,075 MW. While it will generate approximately 5,000 GWh annually.

Trading Update (as on 27th March 2020)
SSE released an update before the end of FY2020. SSE’s adjusted earnings per share (EPS) expected at the lower end of 83-88 pence range in January 2020. Regarding the liquidity position, the Group reported a committed bank facility of GBP 1.5 billion. Among this facility, GBP 75 million is currently drawn. The Board intends to propose a full-year dividend per share of 80 pence for the financial year 2020, despite the current headwinds.

Share Price Performance

1-Year Chart as at June-05-2020, before the market close (Source: Refinitiv, Thomson Reuters)

On 5^th June 2020, before the market close (at 11:46 AM GMT+1), SSE PLC’s shares were trading at GBX 1,264 and were down by 0.28 per cent versus the previous day closing price. Stock 52 weeks High and Low are GBX 1,703.00/GBX 1,057.50.

From the technical standpoint, its shares were trading well above its short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock.

Valuation Methodology


Conclusion
Over the years 2020 to 2022, the Company’s future equity investment is expected to total approximately GBP 850 million, with the equity contribution for FY21 projected to be less than GBP 50 million. SSE Renewables agreement also builds up a strong position in the world’s largest offshore wind market and one of the largest offshore wind farms in Scotland as well as provide profitable growth in renewables and low carbon electricity. The long-term focus continues to be on assisting the transition to a net-zero economy, and this is reflected in the substantive growth made in recent months by the core, low-carbon networks and renewables businesses. Net debt and hybrid capital expected to be approximately £10.7 billion on 31 March 2020.

Based on the decent growth prospects and the valuation done using the above method, we have given a “Hold” recommendation at the current price of GBX 1,259.50 (as on 5^th June 2020, before the market close at 11:10 AM GMT+1).

United Utilities Group PLC – Operating with Strong Financial Position

United Utilities Group PLC (LON: UU.) manages electricity distribution, water distribution and wastewater network in the North West region of England.

On 24^th July 2020, the Company will hold its Annual General Meeting.

Recent News
On 22^nd May 2020, the Company announced that Alison Goligher (independent non-executive director) would be appointed as Chair of the remuneration committee.

Financial Highlights (for the year ended 31^st March 2020, as on 22^nd May 2020)

(Source: Full Year Results, Company Website)

In the financial year ending 31st March 2020, the group’s revenue increased by GBP 41 million to GBP 1,859.3 million as against GBP 1,818.5 million in FY2019, largely reflecting the allowed regulatory revenue changes. The underlying operating profit surged by GBP 59 million to GBP 743.9 million in FY2020 as compared with the previous year (2019: GBP 684.8 million). The underlying PAT (profit after tax) stood at GBP 429.6 million in FY2020 versus GBP 407.9 million in FY2019. The total dividend per share stood at 42.60 pence in FY2020, an increase from the last year (2019: 41.28 pence).

Share Price Performance

1-Year Chart as at June-05-2020, before the market close (Source: Refinitiv, Thomson Reuters)

On 5^th June 2020, before the market close (at 12:10 PM GMT+1), United Utilities Group PLC’s shares were trading at GBX 926.60 and were down by 1 per cent versus the previous day closing price. Stock 52 weeks High and Low are GBX 1,068.50/GBX 743.00.

From the technical standpoint, its shares were trading well above its short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock.

Valuation Methodology


Conclusion
The Company is using advanced technology to enhance the application of System thinking, and they have developed a full plan for the evolution of its key capabilities to deliver over the next five-year period. The Group has a strong financial position to tackle the impact of Covid-19 pandemic. On Underlying basis, the Company has shown an improvement in financial performance for FY20. UU provides excellent customer satisfaction in the water sector. The Group operations are likely to get affected negatively due to uncertainty COVID-19 as it will result in uncertain political and economic climate for short to medium term. United Utilities Group has steadily reduced the average household bill. The Group is focusing on innovation and sustained investments, to deliver against a challenging set of performance targets, while also protecting and enhancing the environment and supporting the local communities.
Based on the decent growth prospects and the valuation done using the above method, we have given a “Hold” recommendation at the current price of GBX 917.40 (as on 5^th June 2020, before the market close at 11:20 AM GMT+1).

Pennon Group PLC - Solid Financial Performance with Decent Outlook

Exeter, United Kingdom-based Pennon Group PLC (LON: PNN) is an environmental utility infrastructure group. The operations of the group are differentiated in three operating segments: Waste Management, Water and wastewater services, and Non-household retail business.

On 31^st July 2020, the Company will hold its Annual General Meeting.

Financial Highlights (for the year ended 31 March 2020, as on 4^th June 2020)

(Source: Full Year Results, Company Website)

Overall results reflected a solid financial and operational performance, with strong funding and liquidity of GBP 1.6 billion. The Group’s revenue increased to GBP 636.7 million in FY20 due to growing retail revenues from Pennon Water Services. EBITDA was marginally lower at GBP 365.3 million in FY20 as compared with the previous year (2019: GBP 367.3 million). Adjusted earnings per share increased by 6.7 per cent to 61.7 pence in FY20. Whilst statutory earnings per share decreased by 6.7 per cent to 47.7 pence in FY20, reflecting the deferred tax charge from changes in enacted headline rates. Dividend per share for FY20 surged by 6.6 per cent to 43.77 pence.

Share Price Performance

1-Year Chart as at June-05-2020, before the market close (Source: Refinitiv, Thomson Reuters)

On 5^th June 2020, before the market close (at 12:45 PM GMT+1), Pennon Group PLC’s shares were trading at GBX 1,101 and were down by 2.91 per cent versus the previous day closing price. Stock 52 weeks High and Low are GBX 1,210.50/GBX 695.20.

From the technical standpoint, its shares were trading well above its long-term support level of 200-day simple moving average prices, which reflects an uptrend in the stock.

Valuation Methodology
 

Conclusion
The Company has declared a higher dividend of 6.6 per cent for FY20, but it expects revenue for FY21 will be on the lower side, due the COVID-19 pandemic. Further, the Group recorded higher absolute interest and surged depreciation on asset growth. The Group witnessed a solid operational and financial performance in FY20. South West Water has maintained its sector-leading returns, while Viridor has continued to drive growth. The Group is also on-track with robust liquidity and funding to weather the existing uncertainty due to Coronavirus. The defensive business nature of the company is allowing its shares to uphold despite free fall in the broader market space. Further, the Company has consistently delivered a ROE of above 10% over the past five years.

Based on the decent prospects, which are supported by valuation done using the above method, we have given a “HOLD” recommendation at the current price of GBX 1,097.50 (as on 5^th June 2020, before the market close at 10:45 AM GMT+1).
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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