Severn increases spending on leaks

WATER company Severn Trent reported lower than expected profits yesterday after it spent more money preventing leaks.

The company, which supplies customers in South Yorkshire, said underlying pre-tax profits fell 1.9 per cent to £155m in the six months to September 30.

The company said its increased spend on preventing leaks had offset average price hikes of 4.7 per cent.

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Chief executive Tony Wray said: “We remain focused on improving services from our networks. We have increased our network replacement activity underpinning our plans to improve network serviceability, supply availability and unplanned interruptions.

“We are maintaining our leakage activity levels following the severity of the last three winters.”

Severn said it would have more staff on hand this winter following an increase in complaints last year after the cold snap burst pipes. The company promised to improve customer service levels after complaints rose 16 per cent in 2010/2011.

The group, which previously warned of near-drought conditions by the spring, said it does not expect any restrictions because of “careful” management of its resources and more rain in recent months.

Severn said underlying water usage was broadly flat in the period.

The group’s bottom-line profits fell 35 per cent to £65.3m, mainly driven by an exceptional charge at its Italian business.

The firm still raised its dividend by eight per cent in line with its policy of raising payouts to investors by three per cent above inflation.

Earlier this week, larger peer United Utilities reported a lower profit hurt by higher capital spending, while Pennon shares slipped on fears of a slowdown at its key waste management unit Viridor.