Viridian suffered a £14 million sterling (€22.9 million) plunge in profits in the first six months of this year largely because of lower margins and increased costs at its IT services division SX3.

The Northern Ireland power distribution group yesterday reported interim pre-tax profits for 2001 of £26.7 million sterling, down from £40.9 million for the corresponding period last year.

The Viridian Group, which employs more than 3,000 people, includes the core business, Northern Ireland Electricity, the business process outsourcing and IT service company SX3 and Open + Direct, the financial services division.

First-half results show the group's turnover increased by more than £55 million to £305 million sterling but, aside from its core electricity business, Viridian's key non-regulated divisions underperformed.

SX3 reported a 33 per cent increase in revenues to more than £51 million sterling but its profits fell to £1 million sterling from £4.7 million last year.

Open + Direct also saw its turnover fall slightly to £20.4 million, while Viridian had a £2.9 million operating loss from Nevada, its joint venture telecoms and internet business with Energia.

The group's other divisions - Energia, which supplies the competitive electricity market, Huntstown Power and NIE Powerteam - fared better in the first six months of the year. Both Energia and NIE Powerteam significantly increased turnover to £43 million and £19 million respectively, while the new £200 million gas driven power station at Huntstown is on schedule for commissioning in December 20002.

NIE also has the prospect of a profit boost from its regulatory entitlement in accordance with existing accountancy rules, which reduces profits in the first half but reverses the situation in the second half.

But market analysts have warned that Viridian is likely to face an equally challenging period in the remaining half of the year. The group is facing a major price control review from industry regulator, OFREG, that will affect its core business in relation to the transmission and distribution prices of electricity in the North.

OFREG is expected to publish its initial views later this month on the price controls which will come into effect from next April, but the uncertainty surrounding future prices has hit the group's share price in recent months.

Some analysts have also warned that profits could be under pressure at Open + Direct because of the timing on some of its property development programmes.