SSE to hike dividend despite earnings drop

 
City A.M. Reporter
Scottish & Southern Energy Britain's second-largest electricity generator, said it was sticking to plans to raise its dividend, when posting lower first-half earnings that beat expectations, lifting its shares.

High wholesale gas prices and low renewable energy output led to a 6.1 per cent decline in adjusted first-half pretax profit which came in at £386m.

"SSE's key financial objective is dividend growth, and we are on course to meet our target of a two per cent real increase for the full year 2010/11, while maintaining a dividend cover in line with our established range," chairman Robert Smith said.

Perth, Scotland-based SSE, which has 9.9m customers, raised its interim dividend 6.7 per cent to 22.4 pence.

Bank of America Merill Lynch analyst Fraser McLaren said the results were slightly ahead of expectations and brought a sense of clarity which will support medium-term growth prospects.

He raised his rating on SSE stock to "buy," saying: "With the stock having underperformed the UK utilities since June, we see the renewed clarity and management confidence as positive."

"The past six months have not been easy, with low renewable energy output and higher wholesale gas costs contributing to a challenging business environment," Smith said.