Southern Electric reported a 5.3% rise in operating profits to £290.1m ($475m), up from £275.4m.

However higher interest charges and the lack of asset sales caused the electricity to post a slight drop in pre-tax profits for the year ending March 31.

They dipped to £248.7m ($407.4m) from £255.5m previously and paid out a total dividend of 23.7p per share, up from 21.5p.

Analysts had expected pre-tax profits of £245m.

Operating profits rose 6.5% in the company's distribution business, 26.6% in electricity supply and 15.5% in generation.

The distribution arm earns its money from delivering electricity along power lines to customers while the supply business handles the actual sales of electricity.

Southern Electric also has 200,000 gas customers, 75% of whom are also customers of its electricity retailing business.

Plans for the future

The company said it was on target to join the competitive domestic electricity market in December 1998.

The gradual deregulation of the market during 1998 and 1999 will end the monopoly regional electricity companies have had on supplying electricity in their local areas.

Southern Electric's finance director, Ian Marchant, has said it is "not inconceivable" that Southern Electric will make an offer for a supply business once the President of the Board of Trade, Margaret Beckett, splits supply and distribution licences.

He said: "I think that with the licence separation of distribution and supply, my belief is there will be opportunities for industry consolidation."