SSE looks to spin out domestic supply business

Given the political scrutiny of the household energy supply market, this looks unlikely to be a straightforward process. The government has been grappling with introducing a price cap for customers on the “standard variable tariff”; a large business component for the big six suppliers. Domestic energy supply has been a thorn in the group’s side for a while now. It was loss-making in the half year with total accounts slipping in these latest numbers to 7.72m, from 8.13m last September. The group is looking to combat this through investing in retaining and building its business customer base, which stayed flat in the year at 470,000 customers.

The performance of the wider group was strained, with adjusted EPS and pre-tax profits down 8.8 per cent and 13.9 per cent, respectively. This is in large part due to a 22 per cent drop in adjusted operating profit from the networks business, from £456m to £355m. The group is anticipating a £150m drop over the full year from the division, following its partial disposal of equity in Scotia Gas Networks, combined with phasing of returns under price control regulations. Despite the challenges, the group has hinted at a turnaround in earnings, with full-year EPS expected to be “at least in line” with consensus expectations of 116p. It also remains committed to its policy of dividend increases at least in line with RPI.

Analysts at RBC Capital Markets are forecasting pre-tax profit of £1.47bn for the year to March 2018, with adjusted EPS of 115p (from £1.78bn in 2017).