Severn Trent profits rise by 7.1%

Harwich and Manningtree Standard: New Severn Trent boss Liv Garfield said the company needs to do better on issues such as sewer blockages, water quality at treatment works and supply interruptions New Severn Trent boss Liv Garfield said the company needs to do better on issues such as sewer blockages, water quality at treatment works and supply interruptions

A dry summer that boosted customers' thirst for water helped Severn Trent lift annual earnings and dividends as new boss Liv Garfield prepares to hammer out a new five-year plan with regulators amid pressure over household bills.

The group said underlying profit before tax rose 7.1% to £269.1 million for the year to March 31 and increased its shareholder pay-out with a pledge of another hike next year - despite bill rises being kept at or below inflation.

But Ms Garfield - the FTSE 100's youngest chief executive - said future pay-out policy could not be determined until Ofwat's final decision on its business plan for 2015-2020 at the end of this year.

The 38-year-old former BT high-flyer said Severn Trent would submit a revised plan for the period to the regulator next month. Ofwat wants firms to accept lower returns to help ease the strain on hard-pressed family finances.

Ms Garfield also spelled out where the company needed to do better - with sewer blockages, water quality at treatment works and lengthy supply interruptions "below the standards we set ourselves".

Severn Trent Water, the main division of the group that supplies 4.3 million households and businesses across the Midlands and parts of Wales, saw turnover increase 2% to £1.54 billion

The company said: "The 2013 dry summer led to higher consumption from metered customers which increased turnover by £7.1 million year on year."

But Ms Garfield, who started as chief executive eight weeks ago, indicated that she was preparing to make her mark on the business after "exploring the organisation from top to toe".

She said: "We know there is much more we need to do to improve our processes, speed up decision making and raise our standards."

Ms Garfield faces a challenge in hammering out the water supplier's future plans with Ofwat.

The regulator has already sent back an initial submission despite the group setting out plans to lift investment by £600 million to £3.2 billion and keep price rises at an average of 1.2% below inflation.

Analysts fear that the final regulatory blueprint could cut the healthy dividends handed out to investors.

Severn Trent said it will submit a revised plan to Ofwat on June 27, and expects a final settlement in December.

The utility said it would lift its total dividend for the year by 6% and next year this will grow again by 5.6%. However, it cannot give further guidance on dividends until it reaches a settlement with the regulator.

Severn Trent said it invested £602.1 million in the business, compared to £555.4 million the previous year, to cut sewer flooding by 20% and supply interruptions by 45%.

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