Brian Kemp, Simon's chief executive, said the disposal of the water and waste treatment businesses was 'part of our established strategy to focus on fewer, larger business sectors'. He added that Simon was well advanced in talks to sell the rest of the environmental division.
Simon will receive about pounds 20m from the disposal because Thames is also taking on pounds 6m of debt. Ian Lowe, an analyst at the stockbroker Smith New Court, thinks the sale will reduce borrowings to about pounds 75m, representing gearing of 57 per cent. He described the price as 'realistic', considering the poor market conditions for environmental businesses.
The companies to be sold had turnover in the year to December 1992 of about pounds 54m and made a small operating loss. During the previous year they had made a pre-interest profit of pounds 1.7m from higher sales of pounds 67m. Net assets at the December 1991 year-end were about pounds 9.1m.
Mike Hoffman, chief executive at Thames Water, said he thought the businesses could be made profitable by splitting their contracting activities from the manufacturing operations.
The acquisition means that Thames now generates about pounds 350m of sales from unregulated businesses, although Mr Hoffman admitted that they had so far failed to make a decent return. In the first half to September 1992 the non-core operations made less than pounds 1m profit from sales of pounds 123m.
Attention now focuses on Simon's profits for 1992 which are due to be announced in March. Mr Lowe forecast pounds 12m before tax, a third down from 1991's pounds 18.3m and believed that the dividend would be almost halved from 15.7p net to 8p.Reuse content