SSE ‘robust’ despite drop in profits

Annual profits fell at SSE, following a year the company said presented “a number of complex challenges to manage”, including plans to merge its household energy supply business with fellow big six supplier Npower, and the looming price cap reforms.

Ahead of the introduction of the cap, adjusted operating profit from SSE’s household supply business held flat at £260 million. It said in its full year update that “while electricity tariffs increased to recognise rising non-energy costs, overall profits were also impacted by customer account losses and the introduction of price caps for certain customer groups, offset by ongoing efficiency savings”.

It also noted a received boost from the cold spell, which saw temperatures plunge during the “Beast from the East”.

SSE also announced it is upping its full-year dividend to 94.7p per share, which is up 3.7 per cent. It also gave five-year estimates for dividends, but investors appeared unconvinced, with SSE’s share price dropping one per cent on the open market in response.

Adjusted pre-tax profits fell six per cent to £1.45 billion in the year to the end of March. Unadjusted, they were down 38.9 per cent to £1.08 billion.

Over the year, SSE also lost 430,000 customers, with domestic energy accounts falling from 7.23 million to 6.8 million.

Over the subsequent three years, SSE is targeting a full-year dividend that “at least” keeps pace with RPI inflation.

Chairman Richard Gillingwater, said: “For investors, by giving clarity on the dividend for the five years to March 2023, SSE is demonstrating that remunerating them for their investment is and will remain its first financial objective.”

He noted the year had “presented a number of complex challenges to manage”, but stressed SSE was “generally very robust and significant progress was achieved in key aspects of the company’s capital investment programme”.

Looking ahead, he added: “The challenges will continue in 2018/19, which is also expected to be a year of major transition for SSE… The changes we are making as we renew SSE are intended to have positive outcomes over the long-term for customers, stakeholders and investors.”

The proposed SSE-Npower merger has been referred for a second stage of investigation by the Competition and Markets Authority (CMA).

A decision on the merger will now be made by a group of independent panel members, and a final report detailing their reasoning will is currently scheduled to be published on 22 October.