SSE profit surge fans flames of price cap row

SSE profit surge fans flames of price cap row

SSE Plc is preparing for "significant challenges" this financial year as the United Kingdom government prepares to cap energy tariffs, threatening profit margins at the nation's biggest utilities.

SSE's overall full-year pre-tax profits more than doubled from £593m to £1.78bn, with the big increase largely explained by accounting charges it took in the prior year.

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

SSE on Wednesday said the amount of cash it would have to pay its dividend would be at the bottom end of the range.

In preliminary results for the year ending March 31, SSE raised its full-year adjusted earnings per share to 125.7 pence from 120 pence the previous year.

It said some 70 per cent of its 6.76m United Kingdom domestic customer accounts could be affected by the cap.

Stripping out exceptional items such as interest costs on net pension liabilities and the removal of taxation on profit from joint ventures and associates, underlying pretax profit rose by 2.1% to GBP1.54 billion.

The full-year dividend increased 2.1 percent to 91.3 pence a share.

However, that is because adjusted earnings per share will fall in the new financial year to the end of March 2018.

Adjusted profit before tax hit £1.5bn this year, while profit margin per dual fuel household customer was around 6.9 per cent against 6.2 per cent the previous year.

It said: 'SSE would however continue to caution against the unintended consequences of intervention in what is a competitive, dynamic and fast changing market.

Some 70% of its 6.76 million United Kingdom domestic customer accounts could be affected by a cap, it said.

"We have been clear for some time that 2017/18 presents challenges, and the need to engage constructively with a new United Kingdom government as it takes forward energy policy will be a key priority for the year ahead and beyond", said Alistair Phillips-Davies, chief executive of SSE.

Capital and investment expenditure was in line with SSE's expectations, reaching GBP1.73 billion, an increase from GBP1.62 billion the year before, and near SSE's guidance of GBP1.70 billion.

It said in a statement: "As a major energy supplier we believe customers" best interests is served by competition, not caps. "It actively assesses the potential impacts of any regulatory changes and will take practical steps to maximise opportunities and mitigate risks; and will be transparent in its disclosures, when necessary", SSE added.