Liv defends water industry’s record on tax and affordability

Liv Garfield

Liv Garfield

0
Have your say

LIV GARFIELD, the new chief executive of Severn Trent, has defended the water industry’s track record on affordability and tax as she unveiled a large rise in profits at the listed utility.

Severn Trent, which supplies homes across South Yorkshire, announced a 7.1 per cent rise in underlying profits before tax to £269.1m.

Liv Garfield

Liv Garfield

The group increased its shareholder pay-out and pledged to do so again next year.

Severn Trent reported a tax credit of £59.2m, reflecting overpayment in previous years.

The water industry has faced criticism from MPs who claim that utilities are using debt interest schemes to avoid tax.

Ms Garfield said the industry has paid a lot of tax for a lot of years and will continue to pay lots in the future.

She added that Severn Trent’s effective tax rate for next year is expected to be 20-22 per cent.

Ms Garfield told The Yorkshire Post that the industry cares about the “critical” products that it supplies to customers and has a decade of below-inflationary price increases built into bills.

“That’s very different to other utilities,” she said.

“It understands one of the key priorities is affordability and it has made concrete commitments so that people can plan for their lives and they can budget knowing where that it is.

“It has done lots of good with an incredible investment programme over the last few years - about £4bn per year is what the industry has invested back into the UK with some great jobs for apprentices.”

Severn Trent said it would lift its total dividend for the year by 6 per cent and next year this will grow again by 5.6 per cent.

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 4.3m households and businesses, saw turnover increase 2 per cent to £1.54bn.

The company said: “The 2013 dry summer led to higher consumption from metered customers which increased turnover by £7.1m 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 £600m to £3.2bn and keep price rises at an average of 1.2 per cent below inflation.

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

Severn Trent will submit a revised plan to Ofwat on June 27.

Back to the top of the page