South West Water to axe 500 jobs

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South West Water is making a pounds 35.5m provision after bringing forward its restructuring plans following last year's contentious price review by the regulator Ofwat.

The company, which yesterday reported pre-tax profits up 6 per cent to pounds 98.7m, said more than 500 jobs would go by next March. This is about a quarter of the workforce.

Ken Hill, finance director, said: "We have increased the severity and brought forward the speed of our restructuring due to the reduction in our capital spending programme.'' Capital investment is being cut from pounds 200m to pounds 160m this year.

South West refused to accept the 10-year price regime announced by Ofwat last year, saying the cap on customer charges would restrict its ability to meet environmental clean-up obligations.

The company, which has the longest coastline of the water utilities, was told to restrict price rises to 1 per cent plus inflation and cut capital expenditure plans from pounds 2bn to pounds 1.4bn. It appealed to the Monopolies and Mergers Commission, whose inquiry is continuing.

Some of the job cuts have already been made, and another 100 are planned by the end of June.

Yesterday's profits of pounds 98.7m, struck before the restructuring charge, were on turnover up 14 per cent to pounds 286m. The profits were in line with analysts' forecasts but there was disappointment about the final dividend of 18.2p, making 27.3p for the year, up 7 per cent.

Analysts said South West could be taking a cautious view ahead of the outcome of its MMC appeal. One said: "Either South West feels the inquiry might not find in its favour or it thinks the timing is not right to push dividends too high.''

Operating profit rose 14 per cent to pounds 121.7m, of which pounds 4m was contributed by non-core businesses.