SSE plc (LON:SSE) has warned of a decline in full year earnings as it faces a proposed a cap on energy bills.
The FTSE 100 listed utility said adjusted earnings per share for fiscal year 2017/18 was likely to be lower than the year before when it rose 5.2% to 125.7p.
The company also said its dividend is set to be a bottom end of its expected range of around 1.2-1.4 times.
Like the other six big energy suppliers, SSE’s earnings are expected to be hit by a proposed cap on prices.
Theresa May has pledged the cap if the Conservatives win the 8 June election, which is a high possibility since the party is considered the favourite to win.
"We have been clear for some time that 2017/18 presents challenges, and the need to engage constructively with a new UK government as it takes forward energy policy will be a key priority for the year ahead and beyond,” said Alistair Phillips-Davies, chief executive of SSE.
SSE's profits boosted by wholesale division...
SSE reported a 2.1% increase in adjusted profit before tax to £1.55bn in the year to 31 March 2017. Adjusted operating profit gained 2.7% to £1.8bn.
On a reported basis - including the impact of write downs to wholesale generation, gas storage and production assets in the previous year -- profit before tax jumped to £1.78bn from £593.3mln and operating profit surged to £1.95bn from £784.3mln.
Its wholesale division swung to a reported operating profit of £498.2mln from an operating loss of £481mln, reflecting exceptional charges of £868m in the prior year related to the thermal generation plants, gas storage facilities and gas production fields.
Within wholesale, the gas storage business recorded an reported operating loss of £13.0mln, compared to an adjusted operating profit of £4.0mln, due to challenging market conditions.
In retail, the reported operating profit fell to £309.6mln from £437.4mln, primarily as a result of impairments relating to the discontinuation of an energy supply customer billing system . The division was also affected by a drop in energy supply customer numbers, an increase in non-energy costs and a reduction in tariffs on gas.
The networks business delivered operating profit of £848.8mln, compared to £833.2mln in 2016.
SSE hikes full year dividend...
SSE recommended a full year dividend of 91.3p, a 2.1% increase on the prior year.
" With a strong and growing asset base, and significant index-linked revenues, we remain committed to delivering annual dividend growth that at least keeps pace with inflation, and to working towards ensuring that dividend cover remains within the expected range,” said Phillips-Davies.
Shares fell initially before recovering in afternoon trade, rising 0.85% to 1,463.29p.
George Salmon, equity analyst at Hargreaves Lansdown, said: "The main attraction of SSE remains the dividend, which has grown every year since 1992, and the shares currently offer a yield of 6.5%.
"However, with customer numbers falling and Theresa May’s price cap adding uncertainty to future revenues from the retail division, the group may find itself leaning on the transmission and distribution parts of its business a touch more than it would like in future.”