Yorkshire Water owner to hand investors £750m

Yorkshire Water's owner Kelda yesterday unveiled a higher-than-expected £750m capital return to shareholders following the sale of its US water business Aquarion.

The move came as the UK's third biggest water company posted a 10.6 per cent rise in first-half pre-tax profit after it raised household bills in the face of soaring energy costs.

However, Kevin Whiteman, Kelda's chief executive, refused to comment on whether the company had received any takeover approaches. Shares in the Bradford-based firm, which provides water and waste services to more than 4.7 million people and 140,000 businesses in Yorkshire, have risen 30 per cent this year on the back of takeover speculation. Shares slipped 1 per cent yesterday valuing the group at around £3.3bn.

Profits on continuing operations for the six months to September 30 were up from £108.7m last year to £120.2m this time round while turnover increased by 7.6 per cent to £435m.

Mr Whiteman said the group had made a good start to the current financial year. "Yorkshire Water continues to be the most efficient water company in the sector and is on target to match the operational costs targets for this year, and that is after absorbing significant increases in energy costs," he said.

Kelda said it would return cash by way of a B share scheme and consolidation, subject to shareholder approval, following the Aquarion sale, which is likely to complete early next year. Analysts welcomed the move but Clive Roberts from Charles Stanley said it was not unexpected. "Following the strong upward share price movement on the back of corporate activity elsewhere in the sector, we believe that the shares are overvalued and so maintain our reduce recommendation," he said.