Severn Trent profits rise despite missing targets

Severn Trent profits rose 7pc to £269m last year, the water utility said on Thursday, despite admitting its performance was not up to scratch.

The company, which serves about 4m customers in the Midlands and Wales, said it had missed its own targets for preventing sewer blockages, the quality of water at its treatment works, and the number of interruptions to customer water supplies that lasted more than 12 hours.

Liv Garfield, who took over as chief executive just eight weeks ago, said that Severn Trent had "much more we need to do to improve our processes, speed up decision making and raise our standards".

She said a one-off incident involving power outages was to blame for an increase in the number of households having water supplies cut off for long periods.

Its performance on sewer blockages had improved significantly and was one of the best in the industry, but had not met a challenging target. "We are doing a good job but we want to do a great job," she said.

Revenues rose by 1.4pc, driven by a 2pc regulated price increase in April 2013. Severn Trent said that "keeping customers’ bills down in the future remains a critical driver for us".

It has committed to a price freeze next year and then below-inflation increases for the following years out to 2020.

Analysts at Deutsche Bank said that the operational performance was "slightly disappointing" but retained a "buy" rating on the stock.

Severn Trent said it was in "constructive engagement" with regulator Ofwat about outstanding issues over its spending plans for the next five years.

These include the company's plans for £255m spending on a "strategic resilieince project" in Birmingham to upgrade an aqueduct that brings water to the city from Wales.

Statutory pre-tax profits rose by 41pc, reflecting an accounting swing from loss to gain on financial instruments.