SSE share price: 4 things we learnt from its annual results
The British energy supplier ended the financial year with its profit falling by more than a third amid calls to renationalise UK energy networks by Jeremy Corbyn.
SSE had a terrible end to the year, with the energy provider seeing its profits take a major tumble after losing around 500,000 customers and leaving investors concerned about its future performance.
‘While our financial results clearly fell well short of what we hoped to achieve at the start of the year, we’ve made significant progress towards our ambition to be a leading energy company in a low-carbon world,’ SSE Chairman Richard Gillingwater said.
SSE faces threat of renationalisation
The company’s future is also becoming increasingly unclear as calls from the Labour Party to renationalise Britain’s energy networks grow louder.
Despite the next general election not expected until 2022, and it unlikely that the opposing Labour party will garner enough support to control a majority in parliament, its leader Jeremy Corbyn laid out plans to renationalise British energy networks.
The news has created a high degree of uncertainty for SSE and other energy providers who are already struggling to compete with smaller, more nimble rivals and increased costs of doing business.
Total GDP contribution to UK economy of £8.9bn and to Irish economy of €689m due to direct and supply chain activities, supporting an estimated 105,000 jobs across both countries.
Change needed at SSE as profits tumble
SSE recorded a 38% decline in pre-tax profit to £725.7 million in its full-year results that helped send its share price lower on Wednesday as the company faces stiff competition and rising costs.
‘The fundamental strengths of our business and the strategic opportunities afforded by the transition to a low-carbon economy will support the delivery of our five-year dividend plan and creation of value for society as a whole,’ Gillingwater said.
SSE to sell home energy business by mid-2020
Following its disappointing set of results that saw it lose half a million customers, SSE announced plans to sell its distressed energy supply business by mid-2020.
The company is considering all options for the unit’s disposal, with SSE looking to pursue a dual-track sale process that could see it sold at auction or spun off via a public listing.
SSE outlook unclear
Looking ahead, the next 12 months of trading are likely to be challenging, especially with output from its renewable electricity generation being hedged below current market prices and the business being hit by regulators decision to cap the price of standard variable tariffs.
Last year also saw the collapse of its planned merger with rival npower, with the pair blaming the failure on the government’s price cap and increasing competition in the UK energy market.
With the myriad of headwinds the path ahead looks unclear for the Big Six energy supplier, with investors’ fears reflected in its share price as the business looks at risk of recording another disappointing FY19/20.
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