A week until Christmas and no sign of an imminent end yet to sloppy RNS updates. The headlines are taken by the profit woopsie from ASOS (ASC) after it too agreed with Mike Ashley's November retail omnishambles comments of a few days ago and pulled down its growth and margin hopes. Thematically, it is much more than a survivor due to its online focus but it goes to show that it’s not easy out there. Anyhow, for those of you tempted by Sunday's Next (NXT) related musings, the in-price available has got that bit naturally cuter...
However it is Scottish & Southern (SSE) that I wanted to write about… I have called the stock lots of things such as 'the most boring FTSE-100 stock' but it is on a recent run of making the headlines - for all the wrong reasons. The latest news that the quite sensible merger deal of its energy supply arm with that of peer nPower is off cannot come as a complete surprise as it has made a complete horlicks of it so far. Certainly market conditions (volatile energy prices) and government wayward utility policy (price caps and the threat of nationalisation by Jezza and crew) have not helped but ultimately the board has come across as a bunch of idiots who promised big...and could not deliver.
Now this comes at a time when the recent operational performance has not been sparkling. Of course all many investors will worry about with this name is surrounding the RPI-adjusted nature of the dividend, which has continued to rumble forward and today means the stock is paying out an unsurprising 5% plus yield. No doubt the assertion that the company is still on track with its 5 year dividend plan will have been the primary concern of many. However it should not be… The trouble with being too focused on the dividend is that you sometimes miss the big picture which in recent months has included a 30% share price fall - or to put it another way, bye-bye to five or six years of dividends. You have to be a real hardcore dividend muncher to be happy about that!
What I would be more worried about is the dichotomy in comments in the release from the energy supply division is profitable/cash flow positive to the proposed deal would not meet all the listing requirements of the exchange. Back to that shabby management again. For what it is worth I do think fears in the utility supply space are overdone but if you want to expose yourself to a company that appears more able to make the price cap workable and is also paying a striking yield, then I suggest you consider Centrica (CNA) instead, whilst leaving SSE firmly in the overpromising and underdelivering camp.
Filed under: ASOS, SSE, Next, Centrica, Telit FCA enquiry, Boohoo, IGAS, China AIM Filthy Forty, caption contest
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