SSE foresees £150m profit hit but shares hold steady

Lucy White
SSE predicted wholesale and retail performance would be up (Source: Getty)

Energy and telecoms supplier SSE today warned it was expecting a £150m hit to its adjusted operating profits in one division ahead of its first-half results in November.

The company said the missing chunk would be in its networks division, impacted by a temporary decline in base revenue from electricity transmission and the sale of gas distribution network SGN to subsidiaries of the Abu Dhabi Investment Authority.

Read more: SSE has lost thousands of customers, but it says its financial targets remain on track

However, the share price was down just 1.55 per cent at the close as SSE added it was expecting higher profits from its wholesale and retail departments. Dividends would aim to be increased at least in line with inflation, and dividend cover would be kept towards the bottom of the 1.2 to 1.4 times expected range.

“There aren’t many sectors with dividend records to rival the utilities. SSE in particular has a remarkable track record, having increased the dividend every year since 1992. Against that background, its yield of 6.7 per cent is an undeniable attraction,” said George Salmon, an equity analyst at Hargreaves Lansdown.

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“However, with customer numbers falling and political pressure for an energy market upheaval growing, we feel in order to keep this impressive dividend growth record going in the years to come, the group must start generating higher returns.

“Despite having spent around £10bn in the last seven years, mainly on renewable energy projects, net operating cash flows haven’t moved a great deal.”

SSE anticipates adjusted earnings per share for the six months ending September of between 30p and 32p, compared to 34.2p last year.

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