Severn Trent hikes dividend despite profit drop as the company vows to keep water bills down

Severn Trent saw underlying pre-tax profits drop 5.8 per cent to £141.3 million for the six months to October

Severn Trent, the UK's second-largest water supplier, has raised its dividend while boasting its customers pay the lowest water and sewerage bills in England and Wales.

Amid soaring energy bills and a  raging row about the cost of living in Britain, Severn Trent’s chief executive Tony Wray said: “We set out with a deliberate strategy to have the lowest charges in the UK, and that’s what we’ve done.  This year our prices are 1 per cent below inflation, next year they will be 1.1 per cent below inflation. We’re committed to keeping our prices as low as we can, as well as keeping on investing. We can do that because we constantly work on becoming more efficient.”

Trent’s own profits fell after the cost of maintaining a raft of private drains and sewers became its responsibility. The Midlands-focused utility, which last week hired BT’s Liv Garfield as its new chief executive, saw underlying pre-tax profits drop 5.8 per cent to £141.3 million for the six months to October. The interim dividend was still raised 6 per cent to 32.16p.

Industry regulator Ofwat has praised Trent and others for swallowing extra costs and passing on the benefits of continual record low interest rates  —  which were not predicted at the start of the  current regulatory period in 2010  —  to customers. Trent has spent an extra £150 million on investing in the water network. By contrast, London supplier Thames Water wanted to hike customers’ water bills by an extra £29 next year to spend more on sewerage, a request that was denied by Ofwat.

Wray said Trent’s low bills supported its campaign to open up the industry to competition. “We firmly believe those that can  perform well should have the opportunity to do that on a wider basis,” he added. “We look forward to there being greater competition in this sector. And we’ll play our part.”

He said he was “very conscious” of the furore around energy bills: “Our customer base has seen their average earnings rise less than rate of inflation. It’s difficult out there for everybody, so the responsible thing to do is to keep our prices down.”