Thames casts damper on takeover hopes
Wednesday 01 November 1995
Thames Water yesterday confirmed plans for cost-saving co-operation with London Electricity but put paid to long-running speculation that the companies plan to merge.
Mike Hoffman, chief executive, said a takeover of London would not be in the interests of shareholders and had not been contemplated "in any depth".
In a high-profile kick-off to the water sector's reporting season, Thames also rejected calls by the watchdog, Ofwat, to commit to sharing between customers and shareholders any efficiency gains over and above those assumed when price controls are set.
Mr Hoffman said regulators "should not get involved" in the dividend plans of the companies. David Luffrum, group finance director, said: "We do intend to outperform the assumptions made and on the whole we believe that those benefits will be shared with customers. We do not intend to get locked into a mechanism or formula that shares our outperformance with customers."
He was speaking as Thames announced a 12 per cent increase in the interim dividend to 9.2p and predicted a similar rate of improvement for the full year. Pre-tax profits rose by 10 per cent to pounds 165m in the six months to 30 September and earnings per share grew by 7 per cent to 39.3p.
Thames shares rose 6p to 427p while those in London Electricity fell by 18p to 902p.
Ofwat said it was "very disappointed" at Thames's attitude. A spokeswoman for the regulator said: "The dividend is high and they have made no commitment to benefit-sharing with the customer. We have also asked them to explain fully to customers the basis on which the dividend payout is made and we will continue to put pressure on the companies on both those fronts."
Mr Hoffman said the "high-level" discussions with London Electricity covered areas including customer services and meter-reading. Many of the potential benfits were "information technology-related and will not come overnight".
Mr Hoffman said Thames Water's overseas expansion plans had begun to bear fruit and that the international business should be making a profit within about two years.
The company has large projects in Turkey, Malaysia, Thailand and China.
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