Southern raises dividend 17.9% and plans rebate: Savings of pounds 20m a year expected from scrapping 1,000 jobs

SOUTHERN ELECTRIC yesterday took the dividend bonanza among regional electricity companies to new heights with a 17.9 per cent rise, the largest increase in the current reporting round.

Having reduced the headcount in its electricity business by 400 last year, Southern also announced plans to shed a further 1,000 jobs by 1996, generating cost savings of pounds 20m a year.

Henry Casley, chief executive, said Southern wanted to be ready to meet any challenges from next year's regulatory review of pricing in its distribution business, which will take effect in 1995.

To balance the dividend leap Southern, whose pre-tax profits rose by 12.6 per cent to pounds 187.3m in the year to 31 March, is planning a pounds 10m rebate in early 1994, worth pounds 4 for each customer.

In April the company cut its tariff by 2.5 per cent at a cost of pounds 35m and from October is offering a 1.25 per cent price cut to users of direct debits, worth pounds 1.25m to customers.

'We are delighted to be able to share the benefits of our success with our customers, who should receive tariff reductions of over pounds 46m in 1993/4,' Geoffrey Wilson, chairman, said.

The final dividend of 14p makes a total of 19.6p. Despite the size of the dividend increase, which comfortably exceeds the 15.9 per cent rise from Seeboard earlier this week, Southern's dividend cover fell only slightly from 2.9 to 2.8 times. Southern shares rose 10p to 482p.

Mr Casley said that about 45 per cent of the pounds 21m increase in Southern's pre-tax profits last year came from reductions in operating costs, which fell by 7.4 per cent after taking account of inflation.

The remainder of the rise stemmed from improved profits in higher- voltage electricity supply and contributions from new subsidiaries.

Flexible working and streamlined administration coupled with the spread of information technology are the main forces driving the new round of job losses over the next three years. Cost savings will appear progressively.

Outside electricity, E&S Retail, Southern's joint venture with Eastern Electricity, since augmented by Midlands Electricity, made losses of more than pounds 14m. But contracting made a profit of pounds 600,000 and gas sales made a first-time profit contribution.

Southern has invested in three independent power generation projects, Barking Power, Medway Power and Derwent Cogeneration, from which it hopes to derive between pounds 15m and pounds 18m of profits a year.

The aim is to have at least 15 per cent of group earnings from non- regulated businesses by the end of the decade.