Severn Trent pipes in pounds 1m a day profits

Severn Trent, the Birmingham-based water company that last month told customers to concrete over their lawns to save water, ran into fresh controversy yesterday when it unveiled record profits of more than pounds 1m a day.

The company, which last year imposed a hosepipe ban on millions of customers, also promised to pursue a more generous dividend policy by cutting dividend cover from almost three to twice the level of earnings by the year 2000 - regardless of the outcome of its bid for South West Water.

"We will still have a strong balance sheet whatever happens," said Vic Cocker, chief executive. "But it will be easier to get to two times cover if we buy South West because we expect that deal to enhance earnings."

Severn's bid, and a rival offer for South West from Wessex Water, are being investigated by the Monopolies and Mergers Commission. But news that Severn's pre-tax profits soared by 40 per cent to pounds 373m in the year to March provoked an angry response from Clive Wilkinson, chairman of the industry regulator Ofwat's central customer services committee.

"When customers think of how many of them had periods without water because of poor service they are bound to wonder whether Severn Trent are making extra money by cutting corners in the delivery of their service," he said.

"It seems that the balance between customers' needs and shareholders' needs are not in the right perspective and that the shareholder is getting the better deal."

But Mr Cocker responded by saying Severn was spending pounds 1m a day on capital expenditure to improve services to customers. He also noted that despite rainfall in the region 70 per cent being below the long-term average, the hosepipe ban introduced in August had been lifted at the end of April: "I view that as a vindication of the action we have taken over the winter."

The rate of water leakage fell from 24 per cent to 21 per cent, while measures taken to increase water supply by 5 per cent include plans to use the River Trent as a source of drinking water for the first time.

As a result of these improvements, Mr Cocker remained confident there would be no repeat of the hosepipe ban, even though one reservoir - the Derwent, which supplies Derby - is only 60 per cent full.

Last year Severn's total dividend rose by 12 per cent to 32.4p, covered 2.8 times from earnings per share 10 per cent higher at 89.6p.

Severn has been rumoured as a possible takeover target for electricity generator Powergen, but Mr Cocker denied the more generous dividend policy was defensive in nature.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
sportWWE latest including Sting vs Triple H, Brock Lesnar vs Roman Reigns and The Undertaker vs Bray Wyatt
Arts and Entertainment
Louis Theroux: By Reason of Insanity takes him behind the bars again
tvBy Reason of Insanity, TV review
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Arts and Entertainment
tvPoldark, TV review
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor