Yorkshire postpones buy-back

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The Independent Online
Beleaguered Yorkshire Water came under fire yesterday from customers and the Labour Party for a substantial increase in profits and dividends last year.

But the company bowed to public outrage about its poor performance during the drought by postponing a planned share buy-back until it has improved its relationship with customers.

The buy-back would have added substantially to the rewards for shareholders, but Yorkshire took the sting out of the postponement by promising the City handsome future increases in real dividends of between 6 per cent and 8 per cent each year - on top of inflation - to the year 2000.

This followed a decision to raise the latest year's dividend 12 per cent to 31p a share after an increase in pre-tax profits of 14 per cent to pounds 162.2m. The profit came after extra drought costs of pounds 47m. Labour called the profits scandalous. Frank Dobson, the shadow environment secretary, said: "Under this Government, the privatised companies are allowed to get away with anything - rip off customers, leak one-third of their water, damage the environment - yet they're not properly regulated and they pay next to no tax.

"Labour will introduce tough regulations to cut the leaks, protect customers and sustain the environment, and we will also impose a windfall levy on the scandalous profits to help finance our plans to provide work and training for young people."

Commenting on the postponed share buy-back, Brian Wilson, Yorkshire's finance director, said: "We believe the balance sheet is inefficient ... but we must regain the confidence of customers first."

With takeover rumours in the air, he held out the prospect to the City that a share buy-back was still possible later this year. He said he would be "disappointed if (customer confidence) is not restored within this calendar year."

The absence of a buy-back depressed the share price, which fell 16p to 718p.

Mr Wilson admitted that Yorkshire had made mistakes but said the priority now was "to get the core water business firing on all six cylinders and customer confidence back."

He defended the dividend growth promise, saying the company would invest more than pounds 600m over the next two years, which he claimed was five times as much as projected dividend increases.

Mr Wilson said the company had seen "a balanced year" between benefits for customers and shareholders. In retribution for its poor customer service, Ofwat, the water regulator, has made Yorkshire cap price increases at inflation instead of the previously allowed increases of 2.5 percentage points above inflation.

Yorkshire had to pay for tankers to import water from neighbouring areas during the supply shortage, contributing to the exceptional costs of pounds 47.2m.

The company expressed confidence that action taken to secure supplies would prevent a repeat of last year's problems and avoid any further exceptional charges.