Water firms pledge to retain dividends

WATER COMPANIES yesterday set out plans to maintain their dividends in the face of swingeing cuts in water bills demanded by the industry regulator, Ofwat.

Both Pennon Group and Yorkshire Water said they expected to avoid cutting dividends in the face of Ofwat's proposals last month for water bills to be cut by 15 to 20 per cent from 2000.

The proposals, which are under consultation, are part of the periodic review of water company regulation by Ofwat unveiled last month. Final proposals will be published next July.

Pennon Group, formerly South West Water, said it would fight the effect of the cuts by stepping up activity in non-regulated businesses such as its Viridor waste management subsidiary. It said it was planning to maintain dividend growth of 8 per cent in real terms.

Ken Harvey, chairman of Pennon, said: "The review is going to hit turnover and profits of our regulated businesses. Our strategy will be to improve operating costs and to prepare for the review.

"The key to our growth will be the development of Viridor. In waste management, the margins are there."

He said non-regulated business should make up half of group turnover within three years.

Half-year profits were up 5 per cent to pounds 71.5m and the interim dividend rose 11.4 per cent to 14.7p. The company also cut costs by 6 per cent in real terms at its main water business.

Operating profits at Viridor jumped by 63 per cent, excluding exceptionals, following the purchase in December 1997 of Terry Adams, a landfill operator. The company has bought three new landfill sites in the last three months and is planning further purchases.

The group said it would challenge Ian Byatt, the head of Ofwat, over the proposed price cuts.

"We will have a vigorous debate with Mr Byatt. You should not take it that we will roll over and accept what he has proposed. But we don't want to debate this issue through the media," Mr Harvey said.

Reporting a 2 per cent upturn in profits to pounds 118m, Yorkshire said dividends would be hit by the review, but a dividend cut was unlikely.

Howard Cressy, group financial controller, said: "It is all to play for in terms of the price settlement. But it would be premature to anticipate the outcome of the review."

Analysts said Ofwat was unlikely to give much ground on price cuts. "What you are playing for is for the cuts to be nearer 15 than 20 per cent," said Geraint Anderson of SG Securities.

Shares in Pennon rose 7.5p to 1131.5p yesterday, while shares in Yorkshire were up 3.5p to 551p.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...