Midlands Electricity surges to pounds 195m

MIDLANDS Electricity yesterday dampened optimism that the industry's regulatory price review would be less harsh than feared.

Bryan Townsend, chairman, said he expected the price review to be tough and refused to comment on Midlands' dividend growth plans until after the formula had been announced in August.

Shares in electricity companies raced ahead this week after Norweb said it expected to maintain real dividend growth of 6-8 per cent after the price controls come into force in 1995 and Seeboard beat the sector with its dividend rise.

Last Friday, Offer, the electricity regulator, sent further details of its proposals to the 12 regional electricity companies. They are reported to show signs of compromise over suggested distribution price cuts of 20 per cent.

But Mr Townsend, announcing taxable profits up 17 per cent to pounds 195.4m, said: 'We think it will be a tough review. We think we are pretty well placed but what the absolute outcome will be I don't know.'

Offer's director-general, Professor Stephen Littlechild, is expected to limit distribution price rises to inflation minus 3 or 4 per cent. He might also impose a one- off cut in distribution prices.

Midlands raised its dividend 16 per cent to 23.2p, and the cover remains unchanged. Some RECs have been raising their cover in advance of the price review. Mr Townsend said: 'We will maintain dividend growth, but to make a target for the future until we know the outcome of the review is brave.'

Pre-tax profits were struck after charging pounds 25m for restructuring, against pounds 10m. About 420 jobs were shed last year, and a similar number will go this year. For every 500 jobs lost the company saves about pounds 10m in wages and another pounds 2m in reduced infrastructure costs.

Operating profit rose 9 per cent to pounds 167.8m on turnover down to pounds 1.42bn from pounds 1.54bn, partly because of lower tariffs to franchise customers. The company saw a significant improvement in the Midlands regional economy.

Profits from the core distribution business fell pounds 2.3m to pounds 142m. In the supply business, profits soared to pounds 33.4m from pounds 18.8m.

Mr Townsend said domestic prices were cut more than 7 per cent during the year, and a further 2 per cent reduction was announced in April. 'Our average domestic bill during the year was pounds 268, the lowest in the country.'