SSE's share price is down 1.5% despite profits rising 9.6%

Its profits might look pretty good, but the unpopular energy giant actually suffered a 28.6% fall in its retail profits after losing 370,000 customers.

by Rachel Savage
Last Updated: 21 May 2014

The words ‘energy company’ and ‘profits’ said together are a red rag to the populist bulls. And thus SSE faced calls to cut gas and electricity prices, after announcing adjusted pre-tax profits rose 9.6% to £1.55bn in the year to March 31.

Britain’s second-largest energy supplier, along with the rest of the ‘Big Six’ (British Gas, Npower, E.On, EDF, Scottish Power), faced the wrath of politicians and the populace last November when it hiked prices 8.2%. In March it then pledged to freeze prices until 2016, but the damage had already been done - 370,000 customers in the UK and Ireland had switched suppliers and energy bosses were the new bogeymen, second only to bankers and outsourcers.

Although SSE’s profits did rise from last year, all is not as it seems - hence shares falling more than 1.5% in mid-morning trading. Firstly, the company’s reported pre-tax profit only crept up 0.7% to £575m, after taking a £747m charge that included the scaling back of its offshore wind projects. More importantly, profits in the retail division - the bit which sells gas and electricity to homes and businesses - fell 28.6% to £292m, which it blamed on a milder winter and higher gas costs.

That was cancelled out by a 24.8% and 9.3% rise in the company’s wholesale and networkers (distributing electricity) businesses respectively, leading Which?’s exec director Richard Lloyd to clamour for it ‘to fairly pass on lower costs to customers’.

However, SSE chief exec Alistair Phillips-Davies told the Today programme that the commitment to freeze prices for the next couple of years would cut profits by £100m. Given the energy giant still has 9.1 million gas and electricity accounts, it’s probably going to try and sit tight until the braying blows over.

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