May 16 (Bloomberg) -- SSE Plc, the U.K.’s second-biggest energy supplier, said fiscal full-year profit climbed 7.7 percent as higher earnings from electricity and gas transmission countered falling energy sales.
Adjusted profit after tax rose to 1.12 billion pounds ($1.79 billion) in the year through March from 1.04 billion pounds a year earlier, the Perth, Scotland-based company said today in a statement.
SSE has benefited from regulated rates for power and gas distribution, even as weakening demand and rising costs erode revenue from electricity generation. Centrica Plc, the largest U.K. household gas supplier, also reported lower income from its residential energy unit last year amid a “challenging” market.
The wholesale cost of gas rose about 20 percent in SSE’s fiscal year, while profitability at gas-fed power plants dropped about 75 percent, it said today. Wholesale prices, a 20 percent decline in household gas use and winter storms presented “major challenges,” even as operating profit from the networks unit gained 6.7 percent, Chairman Robert Smith said in the statement.
“We do expect over the coming three years to see market conditions improve,” Chief Executive Officer Ian Marchant said today on a conference call. Profit margins for gas-fired power generation will “get back to equilibrium” within 12 to 18 months, he said.
SSE advanced 4 pence, 0.3 percent, to 1,329 pence in London. The stock has risen 2.9 percent this year, valuing the company at 12.6 billion pounds.
Capital expenditure gained to a record 1.71 billion pounds from 1.44 billion pounds a year earlier, Marchant said. The company produced more than 70 percent more electricity from hydropower plants and wind farms than in the prior fiscal year.
“We believe 2012/13 will be another tough year, but we continue to expect higher generation profits in the medium term from growing wind capacity and rising wholesale prices,” Martin Brough and James Brand, analysts at Deutsche Bank AG, said in a note. “This should support ongoing real dividend growth.”
SSE plans a full-year dividend of 80.1 pence a share. The utility has paid an above-inflation dividend every year for the past 12 and says it plans to maintain that policy. It has committed to paying out at least 2 percent more than inflation this year.
Operating profit from electricity transmission rose 55 percent over the year, while gas-distribution unit Scotia Gas Networks contributed 44 percent more than a year earlier, the company said.
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