Utility giant SSE is on track to increase its full-year dividend by at least the rate of inflation despite flagging lower earnings at its retail gas and electricity arm.
The Perth-based group said profits in the division have been hit by its price freeze announced last November, which comes to an end next month when electricity prices rise by 14.9 per cent for domestic customers – equating to 6.9 per cent for a typical dual fuel customer.
We can expect additional challenges in the new financial yearGregor Alexander
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SSE said in January that its customer numbers had dropped to 8.08 million from 8.21 million at the end of March 2016, although it added it had begun to halt the exodus.
In a trading update, the firm told investors that while its retail operating profits are set to be “slightly lower” over the year to the end of March, it is expecting higher earnings across its wholesale energy business, despite lower renewable energy output.
But earnings in the networks division, which handles transmission and distribution of electricity, are expected to be largely flat and SSE warned that operating profit in this unit is set to be around £100 million lower in the new financial year.
Finance director Gregor Alexander cautioned over “challenges” ahead.
He said: “The operating environment has presented SSE with a number of complex issues to manage, but in this financial year we have been able to offset the impact of disappointing renewable energy output caused by drier and less windy weather conditions, and we are on course to deliver adjusted earnings per share of between 122p and 125p.
“We are also on course to deliver a full-year dividend increase that at least keeps pace with RPI [retail prices index] inflation.
“We can expect additional challenges in the new financial year, but we are committed to delivering annual dividend growth that at least keeps pace with inflation, and to working towards ensuring that dividend cover remains within the expected range, albeit towards the bottom of it.”
The group is due to report annual results for the year to 31 March on 17 May.
SSE’s price rise will take effect on 28 April. Its tariff hike comes amid a round of similar rises among the major providers, with the likes of E.ON, ScottishPower, Npower and EDF all ramping up their bills. Scottish Gas has extended a price freeze for customers on its standard energy tariff.