12th Nov 2014 12:32
LONDON (Alliance News) - SSE PLC Wednesday said it has increased its interim dividend despite pretax profit falling during the first half of the year due to warmer weather in the UK, lower electricity output and weak gas prices.
For the six months ended September 30, the company's pretax profit fell 6.2% to GBP316.6 million compared to GBP337.4 million a year earlier, mainly driven by a GBP22.1 million loss from its share of joint ventures and associate tax, compared to a GBP40.3 million profit in the first half of 2013 and warmer weather.
Revenue also fell to GBP12.41 billion during the period compared to GBP13.57 billion in the first half of 2013
"The weather in the UK and Ireland has an effect on business operations including variations in customer demand for energy, changes in the volume of electricity generated and, potentially, disruption to power supplies as a result of weather-related damage to the electricity networks," SSE said.
This is reflected in the company's generation portfolio for Great Britain, with total electricity generation falling to 11,733 megawatts at the end of September, from 12,790 megawatts a year earlier. Its thermal output generation portfolio also fell to 7,920 gigawatt hours at the end of the month, from 12,401 gigawatt hours at the end of September 2013.
SSE increased its interim dividend by 2.3% to 26.6 pence per share, compared to the 26.0 pence per share dividend paid in the previous year. SSE plans to deliver annual dividend increases at least in line with inflation over the coming years, it said in its statement.
The wholesale division saw operating profit decline by 83% during the first half to GBP26.7 million. This was mainly caused by lower output of electricity from renewable and thermal sources and by lower gas prices.
For the second half of 2014 and 2015, the company aims at making its wholesale division flexible and sustainable, said SSE.
The networks division saw operating profit rise by 4.7% during the half to GBP258.4 million, reflecting the company's investment in its electricity transmission asset base and improved efficiencies in its gas distribution.
The company's outlook for the network division is to make it more efficient throughout the next year and a half.
The retail division saw the biggest shift, swinging to an operating profit of GBP37.3 million compared to a GBP71.4 million loss in the first half of 2013. The change was mainly attributable to a reduction in the operating loss in energy supply which reflects a number of factors including lower energy purchasing costs, which were partially offset by the impact of mild weather.
Capital expenditure was reduced by 15.5% to GBP679.3 million during the half and SSE said it plans to continue to lower costs throughout the next financial year and has identified around GBP100.0 million of potential savings that can be made by the end of the 2015 financial year.
Of its capital expenditure and investments, 50.1% was spent on its network division, mainly on electricity transmission. It invested 30.7% of its capital expenditure in its wholesale division, investing in thermal and renewable generation, and the retail division received the remaining 10.5% of spend.
During the year, GBP93.4 million was invested in thermal generation, most notably on a GBP19.5 million construction programme for a combined cycle gas turbine, due to be completed by the end of the year, and a GBP21.7 million investment on the multi-fuel generation facility. It invested GBP107.4 million in renewable generation, mainly focused on new onshore wind farms.
Other significant expenditure in the year included GBP212.8 million in electricity transmission and a GBP127.6 million investment on system upgrades for its electricity distribution, such as updating underground cables.
Looking across its networks, retail and wholesale businesses, SSE expects that its capital and investment expenditure will total just under GBP1.60 billion in the current financial year, and total around GBP5.50 billion over the four years to March 31, 2018. Up to GBP500 million of the capital expenditure over the next four years will come from the disposal of assets such as SSE Pipelines Ltd and PFI street lighting contracts, it said in a statement.
"The outlook for the energy industry - and the energy supply market in particular - remains challenging. However, with an unprecedented, unconditional price freeze lasting through this winter and into next, a bold brand strategy to engage customers and stakeholders, and an ongoing commitment to delivering sustained value and industry-leading standards of service, SSE is responding positively to this challenge," it said in a statement.
SSE also announced that it will appoint Richard Gillingwater as deputy chairman from January 1, 2015. Gillingwater will succeed Robert Smith as chairman in 2016 if he is re-elected to the board in July 2015, it said in a statement. Gillingwater is already a non-executive director of the company.
SSE shares were down 3.0% to 1,534.00 pence per share on Wednesday afternoon.
By Joshua Warner; [email protected]; @JoshAlliance
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