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LONDON (Alliance News) - FTSE 100-listed electricity utility SSE PLC said Thursday it expects its annual dividend to rise despite profit almost halving in what it called a "challenging" year, as it continued to look at options for its energy services unit.
For the financial year ending on Sunday, SSE expects adjusted earnings per share of between 64 pence and 69p. This is nearly half the 121.1p reported the year prior.
SSE also anticipates to declare a 97.5p per share annual dividend, up 3.0% from 94.7p the year before. In line with its new dividend policy outlined in May 2018, however, its expects this to fall 18% to 80.0p in financial 2020.
The power provider added that its SSE Energy Services unit is forecast to be both profitable and cash flow positive in financial 2019 and financial 2020.
In financial 2019, however, adjusted operating margin at its household Energy Supply business is anticipated to narrow to between 2% and 3% from the 6.8% reported the year prior following the introduction of a tariff cap during the year and a fall in customer numbers.
SSE is still considering its options for SSE Energy Services including the potential for disposing of the business. Should this not be viable, however, it would retain the unit as a separate business within the group. It expects to decide the fate of the services business by the end of May.
Elsewhere, adjusted operating profit at SSE's Networks unit is expected to show a mid-single digit increase on the GBP768.1 million reported the year prior.
Meanwhile, its Wholesale division is forecast to see a "significant reduction" on the GBP652.4 million profit reported the year prior. This follows the end of power purchase agreements, lower hedged price for renewable energy and the losses incurred in its Energy Portfolio Management operation.
Business Energy, SSE Airtricity and Enterprise units - all part of its Retail division - are all anticipated to show "broadly flat" profit performance on the GBP402.8 million reported the year prior.
"We are making encouraging progress in our core businesses of regulated energy networks and renewable energy, complemented by flexible thermal generation and business energy sales," SSE Finance Director Gregor Alexander said. "Our disposals and stake sell-downs have generated over GBP1 billion in proceeds, demonstrating our ability to create value for shareholders from developing and operating world class assets."
Helped by the disposals, SSE now expects net debt to stand at GBP9.5 billion at the end of March, lower than the initially estimated GBP9.8 billion. Net debt had stood at GBP8.38 billion a year before.
"This year has clearly presented significant challenges and uncertainty in the operating environment persists, but our optionality and agility mean we are well placed to deliver on the strategy we presented last year to create value for shareholders and society from developing, owning and operating energy and related infrastructure in a sustainable way, as well as delivering against our five-year dividend plan," Alexander added.
