Fury at hosepipe ban firm as it pays £180m dividend
Plug the leaks before rewarding your City investors, say experts
THE water giant set to impose a hosepipe ban on seven million customers is poised to lavish shareholders with a dividend payment of more than £180 million, The Mail on Sunday can reveal.
United Utilities will hand out the bumper cash payment on August 3 – just two days before the use of garden hoses is outlawed in the North West of England. Most of the money will be given to big City institutions.
The news is bound to enrage customers who will face fines of up to £1,000 if they dare to use hosepipes or sprinklers during the heatwave.
Water companies have come under fire for putting shareholders above customers by paying out too much in dividends and not i nvesting enough to reduce leakages, which could avoid the need for hosepipe bans in the first place.
The nine maj o r wat e r utilities made £18.8 billion in post-tax profits in the decade to 2016, but paid out almost all of that – £18.1 billion – in dividends.
United Utilities – headed by chief executive Steve Mogford – hopes the hosepipe ban will save 22 million gallons of water daily. However, more than four times that volume is lost to leaks each day in the area covered by the company, figures from water regulator Ofwat show.
Professor David Hall, a water industry expert at the University of Greenwich, said water companies should pay out less in dividends and instead use the money to cut leaks by improving their infrastructure. ‘ The money is available,’ he said. ‘ But it’s not reaching the right places – which are the leaks. It’s reaching the wrong places – which are the pockets of shareholders.’
He added: ‘Every water company in the world should be planning its resources so as to be able to cope with the worst scenarios. And the water companies clearly haven’t been doing that. It’s been a month of hot weather, but it’s following a wet winter and spring. This isn’t really extreme circumstances.’
United’s upcoming dividend payment is the single biggest payday in a decade for shareholders of the FTSE 100 firm, which has dished out more than £1 billion to investors in the last four years alone. The company’s largest shareholders include US financial giant BlackRock along with global asset management firm Lazard. Both will rake in more than £12 million. On Friday, rival Severn Trent paid out a £123 million dividend, while South West Water’s owner Pennon is set to funnel £112 million to shareholders in September. Thames Water last month announced it would halt bonuses to bosses this year and suspend dividend payments to its shareholders, which include a Canadian pension fund and the sovereign wealth funds of China, Kuwait and Abu Dhabi. The decision followed criticism from Ofwat, which forced Thames to repay £15 to each customer over the next two years for failing to tackle leaks. In February, United announced it had recruited a spaniel called Snipe who has been trained to sniff out leaks. Labour leader Jeremy Corbyn has been a critic of t he water firms and the party’s manifesto last year called for renationalisation.
Environment Secretary Michael Gove attacked water companies earlier this year for paying little or no corporation tax. He said: ‘Ten years of shareholders getting millions, the chief executive getting hundreds of thousands and the public purse getting nothing.’
His criticism prompted Ofwat to launch a consultation on how water companies could share more profits with customers. Rachel Fletcher, Ofwat’s chief executive, said companies need to ‘make sure they’ve met their obligations to customers before making dividend payments’.
Last month, Ofwat called for ‘ clear improvements’ in how they plan for droughts.
United Utilities said its total dividend of 39.73p a share is in line with a ‘five-year growth policy’ of payouts that rise in line with retail price inflation. It added that in the five years to 2020 it is investing more than £3.5 billion in ‘essential infrastructure’.
THE average washing machine uses 70 litres of water per cycle and commercial machines use far more. With drought a growing issue and water prices rising worldwide, these figures matter for both households and businesses.
Xeros Technology has developed a way of reducing water usage in washing machines by up to 80 per cent and the group has just signed a major licensing deal with Sealion, one of the leading manufacturers in China. Xeros shares are 69p and should rise as the company completes more such deals in commercial and domestic markets around the world.
Xeros was spun out of Leeds University in 2006 and has spent much of the past 12 years working on its pioneering technology and trying to turn a great idea into a profitable business. Now, chief executive Mark Nichols finally seems to be making meaningful progress.
The technology revolves around so-called XOrbs, small round polymer beads that last for a thousand cycles and mechanically remove dirt, stains and stray dyes.
Water usage i s substantially reduced, less detergent is required and the machine can operate at lower temperatures.
Clothes and other textiles last longer and garments even need less ironing when washed with these little baubles.
The benefits have been proven, but big manufacturers take a lot of convincing, so Rotherham-based Xeros spent years selling washing machines with its technology built in. Top hotel such as the Hilton in Universal City, Los Angeles, now use these machines and have seen their water bills, detergent costs and machine replacement rates come down significantly.
At heart, however, Xeros is a technology company, not a washing machine distributor. So Nichols’ intention is to move towards a licensing model, signing deals with big manufacturers and receiving a fee every time they sell a machine.
The China transaction is the first such contract and was introduced last week at a Chinese laundry exhibition. Other deals are expected this year and beyond.
The group’s technology has other applications. Firefighters’ uniforms, for example, cost about £2,000 each. Washing them with XOrbs helps them last longer and removes toxins, which should boost firefighters’ health and wellbeing.
Tanneries are also starting to use the technology to cut the amount of water they consume and the effluent they generate when producing leather. Nichols is even in talks with jeans makers to see how XOrbs can help denim production. Midas verdict: Xeros joined Aim in 2014 at 123p. The shares hit 300p in 2015 and again last year. They have slumped since then, as shareholders have grown tired of waiting for the business to deliver licensing deals and move towards profitability. Profits are unlikely to materialise for the next three years but new deals should be forthcoming, and with increasing frequency. At 69p, the shares are a buy for adventurous, long-term investors keen to back a British technology pioneer.