However, underlying profits grew more strongly, with operating results advancing 15 per cent. The pre-tax rise was restricted because Welsh earned less interest on its pounds 70m cash pile.
Iain Evans, chairman, said: 'This strong performance owed much to the continued efficient management of the regulated water services business.'
As part of the efficiency drive, Welsh has made 130 of its 3,000- strong water workforce redundant.
Acer, an engineering consultancy bought in February for pounds 50m, contributed pounds 1.6m to operating profits.
The company has embarked on a pounds 1bn capital investment programme to improve environmental standards. The pounds 70m cash will part fund the investment, which is expected to use up pounds 200m a year. In future years, pounds 150m will come from profits and the company will borrow pounds 50m. It envisages a peak gearing level of 40 to 50 per cent.
Welsh is pressing Ofwat, the industry regulator, to allow a 2 per cent increase in domestic water charges to meet the cost of the investment. However, the company said consumer prices would be affected by Thursday's High Court ruling on pollution liability.
The ruling may shift the costs of pollution clearance from industrial to water companies. Welsh said its water came from areas relatively free of industry, and the risk of this sort of pollution was slight.
The interim dividend was lifted 8.3 per cent to 7.8p. The shares rose 7p to close at 699p.Reuse content