Outside interests boost Southern Water results: Company approves highest dividend rise in sector

Click to follow
The Independent Online
A strong performance from Southern Water's non-regulated businesses has helped to lift pre- tax profits by 7 per cent and enabled the company to pay the highest dividend rise of the current water results season.

While some water companies are struggling badly with their unregulated operations, Southern's other businesses contributed trading profits of pounds 10.1m, up 20.2 per cent.

Group pre-tax profits in the year to 31 March rose from pounds 119.2m to pounds 127.5m on turnover up pounds 28m to pounds 347.7m. Group trading profits were pounds 133.6m, up pounds 14m. Southern's cash position remains strong, down pounds 5.5m to pounds 10m at the year- end.

'It was a very impressive performance,' said Kevin Lapwood, of Smith New Court. 'The strength of the non-regulated businesses was particularly pleasing.

'The company's balance sheet is also surprisingly strong, and the group is reasonably well placed for the distribution review in July, given its plans for increased capital expenditure.'

Southern has not made the sort of sizeable acquisitions that Severn Trent or Thames Water made in their aggressive diversification programmes.

Ray King, group finance director, said: 'We did not go in for overseas contracts and high-risk exposure. Our strategy has been to move forward slowly and in a measured way.'

Southern recently strengthened its environmental services arm with the purchase of a 75 per cent stake in GMSS, a public analyst service for Greater Manchester. New waste disposal contracts have been won in hospitals in London, Brighton and Worthing.

Clean-up operations to meet compliance standards in Southern's coastal region meant capital spending rose from pounds 122m to pounds 176m, and is expected to reach pounds 220m this year. Mr King would not discuss next month's review by Ofwat, the industry regulator, to set water company price rises.

A final dividend of 15.4p makes 23.1p for the year, up 8.5 per cent. Ahead of the price review analysts expect profits this year of pounds 135m and pounds 140m and another rise in the dividend to around 25.2p. The shares fell 5p to 513p.

Comments