Yorkshire water owner gets lift from higher prices

Yorkshire Water owner Kelda posted a 10.6% rise in profits today after an inflation-busting increase in household water bills.

Kelda said group profits for the six months to September 30 were up from £108.7m (€160.8m) last year to £120.2m (€177.9m) this time around. Turnover was ahead 7.6% to £435m (€643..6m).

It came after water bills for Yorkshire Water customers increased by 7.7% in exchange for improving efficiency and cutting leakages under an agreement with regulator Ofwat. Kelda today said it was “well placed” to hit the targets.

Yorkshire Water provides water and waste services to more than 4.7 million people and 140,000 businesses in Yorkshire.

Bradford-based Kelda also said it will return £750m (€1.1bn) to shareholders following the sale of its United States water supply business Aquarion, which is expected to get clearance early next year.

However, Kelda chief executive Kevin Whiteman refused to comment on whether the company had received any takeover approaches amid a wave of consolidation in the sector.

Last month Australian bank Macquarie bought Thames Water off German firm RWE in an £8bn (€11.8bn) deal.

Kelda shares have risen as much as 30% this year on the back of takeover speculation but were down 1% today to value the firm at £3.3bn (€4.9bn)

As well as owning Yorkshire Water, Kelda also has Kelda Water Services which manages the group's non-regulated water and waste water contracts in the UK, including one to provide services to more than 1,000 Ministry of Defence sites in the midlands, Wales and south-west.

Mr Whiteman said the Kelda group made “steady progress” in the first half of the year despite rising energy costs.

However, Charles Stanley Stockbrokers analyst Clive Roberts said the results “were slightly below expectations“.

He said: “While today’s news about the return of cash to shareholders is welcome, it was not entirely unexpected, having already seen similar moves by Kelda’s peers. Forecasts could also be shaded down.

“Following the strong upward share price movement on the back of corporate activity elsewhere in the sector, we believe that the shares are overvalued and so maintain our “reduce recommendation.”