News Column

SSE Profit Rises In Full-Year Despite Charge, Retail Arm Woes

May 21, 2014

Anthony Tshibangu

LONDON (Alliance News) - SSE PLC Wednesday reported a slight increase in pretax profit for the full year, as a one-off charge of GBP742.2 million coupled with a fall in profit for its retail business took its toll.

The energy supplier posted pretax profit of GBP575.3 million for the year ended March 31, up from GBP571.3 million a year earlier, as its retail arm recorded a 29% fall in operating profit, reflecting lower use of energy by customers and higher costs including the cost of gas for Energy Supply.

In March the company warned that due to its decision to freeze prices, its profit margin in Energy Supply during the next two years will be lower than in the past.

During the period, the company took a one-off charge of GBP747.2 million, resulted from scaling back of offshore wind projects and the planned disposals of what it called "non-core" businesses like street lighting contracts. This along with the write down in value of coal-fire stations hurt SSE's profit during the period.

Adjusted pretax profit, which excludes exceptional items, rose to GBP1.55 billion from GBP1.42 billion.

However, the firm said its Networks and Wholesale business did better during the year, with operating profit up 9.3% and 25%, respectively. SSE attributed the increase in operating profit in Networks to investment in the asset base of Electricity Transmission and increasing operating profit in Scotia Gas Networks due to a good start to the new price control regime that started in April 2013.

SSE receives 50% of the distributable earnings from Scotia Gas Networks, in line with its equity holding of 50% in the English gas distributor.

The energy supplier said greater output of renewable energy, including from offshore windfarms, boosted its Wholesale segment.

Overall, revenue rose to GBP30.59 billion from GBP28.30 billion in the corresponding period.

Despite its mixed performance the company increased its final dividend to 60.7 pence, from 59.0 pence a year ago, making a total dividend of 86.7 pence, up from 84.2 pence.

Looking ahead, SSE said it hopes to freeze household energy prices in the UK beyond January 2016, or even cut prices if further costs can be taken out of energy.

Household energy prices have become a key issue for the company, as a recent increase in winter energy prices from the UK's major suppliers, including SSE, was met with a public and political backlash and led to an ongoing competition review by the UK's energy regulator Ofgem.

FTSE 100-listed SSE said it believes further savings for consumers worth around GBP100 - forecast to rise to around GBP200 by 2020 - could be made with political action to end the practice of levying government policy costs on energy bills.

Lord Smith Of Kelvin Chairman of SSE said the issues facing the energy sector are very "challenging" but the company is "listening to and helping customers".

"Customers, investors, regulators, politicians and SSE all want the same thing: an energy market that works for customers, and is trusted and seen to do so," he said in a statement. "We believe SSE is not part of the problem but part of the solution to meeting the energy needs of customers in Great Britain and Ireland."

SSE shares were quoted down 0.9% at 1,554.00 pence Wednesday morning.

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Source: Alliance News

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