South West to improve supply

RUSSELL HOTTEN

South West Water is bringing forward pounds 7m of capital spending to improve water supplies to areas still suffering restrictions caused by the summer drought.

The company, which yesterday reported interim profits up from pounds 51m to pounds 54m, also said real dividend growth would continue at 3-4 per cent in the foreseeable future.

Thousands of people in South-west England still face water restrictions after the worst drought for two centuries. About pounds 3.3m was spent in the first half to deal with the shortage and in making payments to customers advised to boil their water to avoid contamination.

The interim dividend rose 7.7 per cent to 9.8p, but the finance director, Ken Hill, said it could not continue at this rate. "We will not be able to match the growth seen at the interim stage from some of the other water companies," he said.

He said any dividend growth would be achieved only through progress in the group's non-core operations, and the current performance indicated a 3-4 per cent growth rate.

The group's non-core waste management and construction services made operating profits of pounds 2.5m, up 13.6 per cent. The pre-tax figure was a 25 per cent fall to pounds 1.2m due to financing costs related to acquisitions made earlier this year. The performance of the core water businesses was expected to be "pretty flat" in the full year, Mr Hill said.