Kelda scoffs at heatwave fears

A BLISTERINGLY hot summer like last year‘s is not a huge worry for water utility group Kelda. The company insisted today that the market outlook was 'reasonably predictable' as it unveiled a 9.4% rise in pre-tax profits to £191.6m.

Kelda, which supplies 4.7m people with water through its Yorkshire Water subsidiary, said it had managed to maintain supplies right through last summer‘s heatwave, even though temperatures had topped 100 degrees fahrenheit in the UK for the first time.

Chairman John Napier said Yorkshire Water‘s service levels had improved 'across the board' with better water quality and fewer incidents of low water pressure, leakage and sewer flooding.

Napier admitted, however, that the company‘s results elsewhere in the UK had been 'mixed'.

The company‘s contract business won one of the largest contracts awarded in recent times, a 25-year deal with the Ministry of Defence to supply water services to sites in the Midlands, Wales and South West region.

Kelda's business support services arm Loop failed to meet expectations during the year as a result of unrecovered costs on a third party contract.

The group‘s US water business, including supply company Aquarion, one of the 10 largest investor-owned utilities in the US, produced a steady improvement.

The coming financial year will be dominated by the first draft of industry regulator Ofwat's pricing review for 2005 to 2010, which will largely determine Kelda's prospects for the period.

There was further good news for investors with a 9% increase in adjusted earnings per share and a full-year dividend of 26.83p a share, up 3%.

Kelda has an enthusiastic following in the City. Smith Barney recently raised its price target on several water companies, including Severn trent, Pennon and Kelda. Analysts said the changes reflected what they felt was more clarity and certainty on regulatory issues in the UK water industry.