LONDON (ShareCast) - In accepting the final determination from the water industry regulator, Severn Trent has cut its dividend for next financial year but plans a £100m share buy-back programme to reduce its gearing ratio.
For the 2015/16 financial year, the company's board has agreed to set its dividend at 80.66p, which is a 5% decrease compared to the current year total of 84.9p.

"Our policy will then be to grow the dividend annually at no less than RPI until March 2020. This replaces the current dividend policy of RPI+3% which runs until March 2015," the company said in a statement.

The firm also promised on Wednesday that its water bills will "fall in real terms over the next five years, by which time they will be around £60 below the industry average".

This will be enabled by the implementation of a recently undertaken price review, according to Severn Trent.

"In order to deliver our plan and reflecting the lower cost of capital allowed by Ofwat, Severn Trent has reviewed its financing plan and dividend policy.

"Going forward, the company intends to manage its existing debt portfolio and future debt issuance to increase the proportion of debt which is at floating rates. In addition, the board has decided to move towards a net debt/RCV gearing ratio of around 62.5% which is in line with Ofwat's notional assumption."

Severn Trent also confirmed on Wednesday that its new chief financial officer James Bowling will takeover the role from 1 April 2015.

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