South West shows 3% rise: Water group hits interim target

SOUTH WEST WATER, the privatised utility, brought its half-time results in on target, with a 3 per cent rise in profits before tax.

The group made pounds 50.3m before tax in the six months to the end of September on turnover that rose 30 per cent to pounds 125.7m. Keith Court, chairman, said: 'These sound results are in line with our expectations.' A 7 per cent increase in the interim dividend pushed the share price up by 3p to 569p.

The company also announced the appointment of Sir Geoffrey Chipperfield, former permanent secretary at the Department of Energy and latterly chief executive of the Property Services Agency, as a non-executive director.

The turnover rise came mainly from a 14 per cent increase in water and sewerage bills, although there was also a contribution from South West's non-regulated businesses.

South West has expanded into waste management, scientific instrumentation and construction services. They produced pounds 1m operating profits on turnover of pounds 19.7m.

The group has a tricky time balancing return to shareholders with costs to consumers, who bear the biggest bills in the country. South West has one of the most onerous capital expenditure programmes in the industry because of an antiquated sewerage infrastructure and the cost of cleaning up the beaches on its long coastline.

Mr Court said: 'We've spent pounds 700m since privatisation and we're where we expected to be at this stage in our programme.'

He added that although the industry regulator, Ofwat, recently indicated an austere pricing regime, he believed South West would be able to meet its investment commitments, which will total pounds 2bn by the end of the century.

'Close attention to cost control has held operating costs in our water and sewerage business. The increase in turnover improved operating profitability by 32 per cent. This significant profit level is vital if we're to fund our capital investment programme through reinvestment,' Mr Court said.

Earnings per share rose 3.5 per cent to 38.4p. The interim dividend is 8.4p. There is a scrip alternative.