The profits, for the year to 31 March, were held back by interest charges of pounds 14.1m paid on South West's high borrowings which it made to fund heavy capital expenditure costs. In previous years interest had been a net contributor to earnings. A 7.5 per cent rise in the final dividend to 17.1p, making 25.5p for the year, failed to stop the shares falling 15p to 525p.
The water companies are in talks with Ofwat, the industry watchdog, about K factors, the rate above inflation by which they may raise prices.
South West, which this month paid pounds 400,000 to settle the Camelford water-poisoning incident, has one of the industry's largest capital expenditure programmes. There is concern that Ofwat will hold back price rises, forcing it to scale down spending.
Capital spending last year was almost unchanged at pounds 203m, two- thirds of which goes on cleaning programmes to improve South West's extensive coastline.
Turnover was up 29 per cent to pounds 252m, and operating profits also rose by 29 per cent to pounds 106m. About pounds 57m of the increase in turnover came from price rises in the core water business.
The group's non-core businesses made improved operating profits of pounds 2.4m.Reuse content