Hoffman is ousted from Thames

Water turmoil: Second top-level departure in less than a week as takeover speculation in the industry reaches fever pitch

Michael Hoffman, chief executive of Thames Water has been ousted from the company with a payoff of up to pounds 500,000. His departure coincides with Thames's decision to withdraw from loss-making contracting operations at a cost to the company of pounds 95m.

This is the second high profile departure in the water industry in less than a week. Last Friday saw 52-year old Trevor Newton - the managing director of Yorkshire Water who shot to notoriety for not bathing during the drought - take early retirement.

Thames said that the strategic changes announced yesterday would allow the company to focus on its core utility business in the UK and on international projects involving building and operating water systems. Sir Robert Clarke, chairman, said: "We feel confident we can grasp the nettle and get rid of things that have not been doing well. We will continue to improve the core businesses and we will prove that we can make decent money from our major projects overseas."

The shake-out at the company will involve Sir Robert taking on an executive role while Bill Alexander, managing director of the core UK utility, takes on responsibility for the entire group.

Sir Robert said he could not comment on the payoff for Mr Hoffman, who was on a two-year rolling contract with a salary of pounds 250,000. He said it would be wrong to assume a figure of pounds 500,000 but that it has not yet been discussed.

City analysts were disappointed that a new chief executive has not been brought in from outside the company. There was also speculation that Thames might launch a share buyback now that it is largely pulling out of the problematic non-core businesses. One analyst said: "They have been clearing the decks of the non-core garbage and someone had to fall on his sword to pay for the ill-fated diversifications."

Mr Hoffman's demise comes only a week after Yorkshire Water, which has been heavily criticised for its handling of last year's drought crisis, said its managing director, Trevor Newton, would retire at the end of May. Thames and Yorkshire are two of only four large water and sewage companies which have not been taken over or are not involved in bid attempts.

Shares in Thames Water rose by 17p to pounds 5.75 on increased speculation that the company might become a bid target and on hopes of a move to return value to shareholders.

Thames will take an exceptional charge of pounds 65m in the year to March and said that a further pounds 30m of goodwill written off to reserves on acquisition will be charged back through the profit and loss account. The operations to be disposed of have hit profits in the 12 months to 31 March by pounds 26m.

Thames forecast an increase in profit before tax and exceptional items in the year to March of about 6 per cent on the 1994/95 level of pounds 304m. The company said that the 12 per cent increase in dividends at half time is expected to be maintained for the full year.

The operations to be sold include Reading-based Portals Water Treatment, which employs 250, Utag in Germany and Permutit in Egypt. Waste Solutions in the US will be closed.

Comment, page 17

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