SSE profits up and begins PR offensive

Energy supplier SSE posted a 38 per cent jump in profits in the first half and immediately moved to offset a media storm over its hike in household bills last month.

Energy supplier SSE posted a 38 per cent jump in profits in the first half and immediately moved to offset a media storm over its hike in household bills last month.

The firm pushed up its dividend 5% to 25.2p as earnings per share leapt 40.6% to 35.3p.

In a move clearly meant to limit reputational damage, its financial report begins with Lord Smith of Kelvin, Chairman of SSE, explaining why the jump in profit could be justified after the rise in bills.

"Prices achieved for generating electricity have been weak, and higher gas and non-energy costs unfortunately had to be reflected in the increase in household energy prices which SSE implemented last month," he said.

"The Energy Supply business accounted for 8.1% of SSE's adjusted operating profit in the period and its profit margin was 1.5%."

His statement goes on to say: "I believe that profit and dividend allow SSE to employ people, pay tax, provide services that customers need, make investments that keep the lights on and create jobs, while providing an income return that shareholders like pension funds need".

The company is targeting a full-year increase in its dividend of at least 2% more than RPI inflation, to around 84p for 2012/13, and annual increases that are above RPI inflation in the following years.

Operating profit at the firm's network arm was up 19.3% to £399.5m, while profits at its retail division leapt to £75.7m, following a loss of £101.4m a year ago.

Retail profits made up 12.6% of profits, with an energy supply profit margin of just 1.5%.

Its wholesale division saw operating profit plunge 44.5% to £123.2m.

SSE stuck to its previous line that it would not provide an outlook for adjusted profit before tax before the publication of its third quarter statement.

It put this down to economic uncertainty, particularly over the electricity generation market in the UK, as well as its focus on dividend growth.

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