ENERGY giant SSE has bemoaned the possibility of “significant consequences” on its finances should an energy price cap be introduced, as it revealed SSE writing off £120m on abandoned IT projects.

The group was speaking as its accounts for the year to March showed that on revenue of £29 billion, there was a 2.1 per cent uplift in adjusted pre-tax profits to £1.5 billion, in spite of losing a further 190,000 customers.

The Perth-based group said 70 per cent of its 6.76 million domestic customers would see changes to their bills with the introductions of a price cap such as that proposed by the Conservatives in the party’s election manifesto.

Such a cap would deliver estimated savings of up to £100 a year for households on standard variable tariffs and analysts have said such a move would lead to heavy cost-cutting among energy suppliers.

But SSE chief executive Alistair Phillips-Davies said the group’s “business model is designed, amongst other things, to provide underlying resilience when there is regulatory uncertainty.”

Adding that 2017/18 would present challenges, he said: “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.”

In the part of its business that supplies gas and electricity, SSE saw adjusted operating profit fall by two per cent to £389.5m, with £261m of this coming from the supply to domestic households. The operating profit margin for dual fuel households increased to 6.9 per cent, from 6.2 per cent.

Reported profit in the division was hit by a series of impairment charges, notably £83m from ditching a new customer service and billing system, and a further £37m on abandoned technology projects.

An SSE spokesman said the group had opted to focus on improvements to its current system. “It was a difficult decision, but it was the right one in the current environment,” he said.

This came as the group lost a further 190,000 domestic customer accounts in the year, with 20,000 business accounts also closing.

Overall, adjusted operating profit across its entire retail business was down 7.3 per cent to £422m.

In its wholesale business, adjusted operating profit was up 16 per cent to £514m, while networks climbed 1.1 per cent to £936m, which combined was enough to offset the fall in retail, giving an overall increase in adjusted operating profit of 2.7 per cent to £1.9bn.

SSE has previously said it expects operating profit in its networks division to fall £150m, citing factors that include a reduction in revenue following the sale of part of its stake in gas network SGN for £621m.

Adjusted earnings per share was up 5.2 per cent at 125.7p, helping boost the dividend by 2.1 per cent to 91.3p – the 18th successive increase in the full-year dividend. Dividend cover was 1.38 times, but SSE has warned this may be cut as a result of the ongoing uncertainty in the energy market.

SSE said an energy cap would damage competition, restrict customers’ choice of products and limit their desire to switch – especially if they believe that prices are regulated or if prices become clustered around a mandated cap.

“Until the facts are known, the uncertainty around a possible price cap would clearly add to the risk for SSE and other energy suppliers and add to the volume of regulatory changes that need to be addressed and implemented and the significant consequences for finances,” it said.

SSE warned that a price cap is one overriding issue that could cut its dividend cover, with the group expecting cover to be towards the bottom of the 1.2 times to 1.4 times range – the cover is based on SSE’s commitment to keep dividend increases in line with retail price index inflation.

George Salmon, equity analyst at Hargreaves Lansdown said with a yield of 6.5 per cent on the share price, the SSE dividend was the main attraction for investors, but added: “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.”

SSE’s investment and capital expenditure totalled £1.7bn for the year, with almost half being spent on electricity networks and one fifth on renewable projects, predominantly on and off shore wind firms.