Wessex urges fair deal

Wessex Water yesterday urged the Treasury not to single the company out for harsh windfall tax treatment in next Wednesday's Budget because it had avoided the ill-fated overseas spending sprees of other privatised water groups.

Nicholas Hood, chairman,hinted that Wessex may go on the acquisition trail and declined to rule out further share buybacks after a capital restructuring earlier this year which handed back pounds 185m to investors.

Mr Hood repeated Wessex's long-held view that a legal challenge to the windfall tax was unlikely to succeed: "The Government has a mandate and I'm sure it will be legal." But he contrasted Wessex's cautious approach to acquisitions with companies such as Thames Water and United Utilities, which have been forced to make large write-offs to cover problems with overseas projects.

"The windfall tax mustn't be based simply on ability to pay. The good companies should be able to thrive and the poor companies deserve to suffer. We have low debt levels because we run our business efficiently," said Mr Hood.

The warning came as Wessex joined its peers in the dividend spree by raising its payout to shareholders by 18 per cent to 18p. The increase is above the average of just over 17 per cent for water groups reporting annual profits for the year to March.

Wessex's pre-tax profits rose by 8 per cent last year to pounds 145m, while the group confirmed its place as one of the most efficient water companies with a further 3 per cent drop in operating costs. Profits from the non- regulated waste business edged up by pounds 600,000 to pounds 25.1m, slightly below analysts' expectations. Wessex said it had spent about pounds 3m over the past two years on its takeover approach to neighbouring South West Water which was blocked by the Government.

Wessex shares fell 1p to 385.5p.