SSE squeezes higher profits from household energy customers

SSE has played down its growth in full year profits

SSE has played down its growth in full year profits

Shares rose 1% to 1465p.

It said despite a 2.1 per cent rise in annual underlying pre-tax profits, to £1.55 billion, it anticipates a "number of items" will have an impact on profits in the next financial year. Standard prices tend to be higher than fixed-rate deals, so companies with a greater proportion of customers on SVTs are able to make bigger profits through the energy cycle.

Its wholesale business reported an operating profit of 498.2 million pounds after a loss of 481.3 million in 2015/16.

SSE's profits boosted by wholesale division.

That was because despite this decline, as well as higher non-energy costs and a cut in its gas tariff, there was a fall in wholesale energy prices and higher average consumption of energy.

Results from Networks was impacted by the reduced stake held in United Kingdom gas distribution business SGN, after selling off a portion of its stake.

The networks unit oversees gas distribution and electricity transmission and distribution.

SSE, which raised dual fuel prices by 6.9% on April 28, said United Kingdom and Ireland customer accounts fell from 8.21 million to 8 million in the year to March 31 as it faced competition from smaller rivals, but insisted it was beginning to halt the exodus.

The firm lost around 190,000 domestic accounts (100,000 electricity, 90,000 gas) and around 20,000 business accounts across United Kingdom and Ireland. On an adjusted basis, pretax profit rose to GBP1.51 billion from GBP1.45 billion.

SSE recommended a full year dividend of 91.3p, a 2.1% increase on the prior year.

The dividend was the focus on Wednesday.

Dividend cover for the next financial year would be "within, but towards the bottom of the expected range of around 1.2 times to around 1.4 times", the company said, marking lower earnings per share compared with the previous year.

SSE hikes full year dividend.

.

"SSE believes that the quality of its operations, assets and investment opportunities means it can continue to deliver a full-year dividend that at least keeps pace with RPI inflation in 2017/18 and in the subsequent years", said the company.

Profit margin per dual fuel household customer - a key measure in the industry - was around 6.9% compared with 6.2% the previous year.

It added: "SSE would caution against potential unintended consequences of any proposed intervention in what is a rapidly changing and increasingly competitive market".

The comment on sector regulation is prominent at present, with United Kingdom political parties targeting the energy industry among others ahead of the UK's snap general election on June 8.

The proposed cap, which would be set by Ofgem, would affect energy customers with a standard tariff, who typically pay the most expensive energy bills.

It said in a statement: "As a major energy supplier we believe customers" best interests is served by competition, not caps.

"In responding to such uncertainty, SSE engages constructively with governments and regulators".

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