The share price of SSE (LSE: SSE) — the second largest supplier of electricity and gas in the UK, via its SWALEC, Southern Electric, Scottish Hydro Electric, and Atlantic Electric & Gas brands — is currently down 1.5%, following release of the company’s preliminary results for the year to 31 March 2014.
Overall, adjusted pre-tax profit was up 9.6%, at £1,551m, but the details reveal a mixed bag of results. While operating profits in its Wholesale business rose 24.3% (to £634m), and were up 9.3% in its Networks business (to £955m), they tumbled 29% in its Retail operation (down to £292m), the fall attributed to the lower use of energy by customers and higher costs.
However, statutory pre-tax profit was up only 0.7%, owing to almost £750m of exceptional items, which included the disposal of non-core assets and businesses, and the scaling back of the company’s commitment to offshore wind projects.
Adjusted earnings per share grew 4.1% to 123.4p, and the board has recommended a final dividend of 60.7p per share, up 2.9% on last year. That will bring the total payout for the year to 86.7p per share, up 3% on last year’s, although the dividend is only covered 1.42 times by adjusted earnings, somewhat below the 2 times “comfort-level”.
Commenting on the results — and on the current focus on energy regulation and prices — SSE Chairman Lord Smith of Kelvin said:
“SSE is listening to and helping customers with the longest ever household energy price freeze in the Great Britain market;we have well-defined plans for net investment of around £5.5bn over the next four years in maintaining, upgrading and building the electricity assets customers depend on; and we are committed to giving investors a fair return through an annual dividend that at least keeps pace with inflation.
“The issues facing the energy sector are very challenging. Nevertheless, customers, investors, regulators, politicians and SSE all want the same thing: an energy market that works for customers, and is trusted and seen to do so. We believe SSE is not part of the problem but part of the solution to meeting the energy needs of customers in Great Britain and Ireland.“
At 1,544p SSE’s share price is down 7.4% on this time last year, versus an essentially flat FTSE 100, and it trails the index over five years, too, with a gain of just 37% compared to the FTSE 100’s 56% rise.
That said, the gap will have been narrowed by SSE’s dividend, which is currently giving a near-6% yield, close to double the FTSE 100 average of around 3.5%.
