From Hargreaves20 May 2010 12:42
Utility supplier, Scottish and Southern today (19th May 2010) posted a pre-tax profit of £1.29 billion for the financial year to the end of March, matching analysts’ expectations. Revenue was down 15 per cent at £21.55 billion for the full year, versus £25.42 billion in the same period a year earlier. The group is bidding for the three UK electricity distribution networks which may be sold by EDF Energy and is likely to require a capital raising exercise. Furthermore, in a recent announcement, the group, in a joint venture with German utility RWE AG said they had secured rights from the Crown Estate to develop a new, 500 megawatt wind farm off the coast of Suffolk. The proposed Galloper offshore wind farm is close to the company’s Greater Gabbard project, the world’s largest wind farm under construction.
Negative Points:
* The energy supply industry remains intensely competitive.
* The group is exposed to movements in commodity prices and evolving energy markets.
* The company operates in a highly regulated environment.
Positive Points:
* The company set a new target to deliver annual increases in the dividend of at least 2 per cent more than retail price index inflation in each of the three years to March 2013, with sustained real growth thereafter.
* The group recently announced it will enter the renewable waste treatment sector with a £13.5 million investment into a biogas plant in North Ayrshire.
* Scottish and Southern is the U.K.'s second-largest energy retailer by number of customers (9.35 million).
* Scottish and Southern is a potential acquisition target and could itself become involved in a merger or acquisition.
* The group recommended a final dividend of 49p per share, giving a full-year dividend up 6.1 per cent to 70p.
Consensus
On balance, market consensus indicates a hold.
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