SSE shares sink on news of weatherrelated profit blow

● But Perth-headquartered power giant says underlying picture remains strong

the Perth-based utility giant, saw its shares lose their spark after it warned that halfyear profits will tumble 50 per cent.

The group – formerly known as Scottish & Southern Energy – said in a trading update that adjusted operating profit for the first five months of the financial year was knocked by about £190 million, chiefly due to higher-than-expected gas and commodity prices. Results were also impacted by dry, still and warm weather over the period.

“The net result is that SSE currently expects its adjusted operating profit for the six months to 30 September will be around half of that delivered in the same period in 2017,” the group told investors.

Shares closed down 8.3 per cent at 1,147p trimming earlier heavier falls.

Michael Hewson, chief market analyst at CMC Markets UK, said: “SSE shares have taken a battering after the company warned that profits would come in well below expectations, as the hot summer weather and higher gas prices hit margins and consumption.

“Profits for the first half of this year are expected to come in 50 per cent lower than expected.

“Coming on top of the recent energy price caps announced by Ofgem the whole sector has sold off as investors project similar sharp falls for its peers with Centrica, Severn Trent and E.ON shares all showing sharp falls.”

SSE said its wholesale division is expected to show a “significant” drop in adjusted operating profit from energy generation and an adjusted operating loss of around £100m in its energy portfolio management unit.

While gas production is set to deliver a rise in profit, it will not be enough to offset a loss across the entirety of its wholesale business.

Chief executive Alistair Phillips-davies said: “Lower-thanexpected output of renewasse, ble energy and higher-thanexpected gas prices mean that SSE’S financial performance in the first five months has been disappointing and regrettable.”

However, he stressed that the group remained on a solid footing.

“The underlying quality of SSE’S businesses remains strong, with regulated networks and renewables providing the core of what will be an infrastructure-focused SSE group in the years ahead,” the SSE boss noted.

“This year’s £1.7 billion programme of capital investment, mainly in regulated networks and renewables, has continued to go well in recent months.”

George Salmon, equity analyst at Hargreaves Lansdown, said: “Hardly any rain or wind meant output from its hydro and wind assets wilted in the heat, and with nobody putting the heating on, customer meters just didn’t tick over. All the while, the price of gas in the wholesale market has kept on rising. Pledging to make good its promise on the dividend will sugar the pill of another profit warning.”