UK Markets close in 2 hrs 24 mins

SSE earnings drop, outlook unclear on Labour nationalisation threat

By Susanna Twidale
FILE PHOTO: An SSE vehicle is parked outside the Pitlochry Dam hydro electric power station in Pitlochry, Scotland, Britain, November 8, 2017. REUTERS/Russell Cheyne

By Susanna Twidale

(Reuters) - Energy supplier SSE Plc said on Wednesday annual earnings fell more than a third as it battled stiff competition and warned of an uncertain outlook due to the opposition Labour party's plans to nationalise Britain's energy networks.

While a British election is not due until 2022, and opinion polls show the main opposition party falling short of a governing majority, Labour laid out plans this month to offer shareholders less than current market value under a future nationalisation.

SSE's chief executive said there was huge uncertainly over Labour's plans and a question mark over whether they would even achieve a majority in parliament to enact the strategy if they were to get into power.

"We will make sure we cover all angles we need; regulatory, legal and otherwise," Alistair Phillips-Davies told journalists on a media call, without specifying what the actions could be.

Profit at its retail Energy Services business, which SSE hopes to sell or list separately, were hit by a regulator-imposed price cap on the most widely used energy tariffs, SSE said.

Energy regulator Ofgem was told by parliament last year to cap energy prices after lawmakers said customers were being overcharged for electricity and gas. Prime Minister Theresa May had called the tariffs a "rip-off".

Phillips-Davies said the company is still committed to separating the retail unit and said a listing was likely happen in the second half of 2020 if no buyer was found.

Large energy suppliers in Britain have struggled against competition from smaller, nimbler rivals often able to offer cheaper prices. SSE's Energy Service customers fell 8% to 6.25 million.

The company, one of Britain's "big six" energy suppliers, said adjusted earnings for the 12 months ended March 31 fell by just over a third to 67.1 pence per share.

Analysts on average were expecting earnings of 69.4 pence per share for the reported year, according to IBES data from Refinitiv.

Shares in SSE were down 1.3%, having briefly touched a nine year low.

"SSE's shares have been hammered recently on the back of concerns relating to the Labour Party's nationalisation plans, and the risk of a disappointing FY19/20 outlook," analysts at Jefferies said.


(Reporting by Susanna Twidale in London and Pushkala Aripaka in Bengaluru; editing by Patrick Graham, Emelia Sithole-Matarise and David Evans)