The share price of SSE (LSE: SSE) (NASDAQOTH: SSEZY.US) added 23p to 1,521p during early trade this morning after the energy supplier revealed plans to trim costs by £100m in the next two years.
SSE announced it will cut 500 jobs and reduce investment in offshore wind farm developments as part of the cost-cutting drive.
Additionally, SSE has promised to freeze gas and electricity until at least 2016. While this will lower profits for the group, it will streamline the business in attempt to offset this.
The energy market has been under attack from politicians due to longstanding concerns that there’s a lack of competition, and SSE’s price freeze is likely a pre-emptive measure prior to a formal inquiry.
SSE’s chief executive, Alistair Phillips-Davies, commented:
“We’re setting out a positive agenda for customers, including our price freeze to 2016; we’re making sure our own house is in order for the future by streamlining and simplifying our business; and we’re making clear we wish to work with people to find more ways of taking costs out of energy bills.
“In all of this, I hope that people will see a company like SSE not as part of the problem but as part of the solution.”
After this morning’s price movement, shares in SSE may trade on a price/earnings ratio of 13. The shares offer a prospective income of 5.8%, covered 1.3 times by earnings.
Whether you feel earnings will be crimped too much by today’s price freeze, the decision to ‘buy’ or ‘sell’ remains up to you.
