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- Severn Trent serves around 8 million people in the Midlands and Wales
- The firm said its performance for the year ending January 23 ‘remains on track’
Severn Trent intends to increase its annual dividend payments, amid rising consumer bills and controversy over sewage spills and its accounting practices.
The Water Company, which serves around eight million people in the Midlands and Wales, expects to pay a dividend of 126.02p per share to shareholders in the 2025/26 financial year, compared to 121.71p per share the previous year.
The increase is based on the consumer price index, including the owner-occupant housing cost index (CPIH) as of November 2024.
At the beginning of December, Ofwat gave the green light to Severn Trent’s five-year plan to invest £15bn in improving water health and infrastructure.
Severn plans to replace approximately 1,400 kilometers of the water network to reduce leaks by 16 percent, reduce pollution by another 30 percent and become operationally net zero by 2030.
To help pay for these upgrades, OfWat will allow the company to increase average annual customer bills by 47 per cent to £583.
Shareholder payouts: Severn Trent intends to increase its annual dividend despite controversy over wastewater spills and its accounting practices
Severn announced the dividend increase as the FTSE 100 company revealed its financial performance for the year ending January 23 ‘remains on track’.
It hopes to achieve an outcome in line with guidance, which includes more than £100m in performance delivery incentives in 2017 prices, a measure used by regulator OfWat to monitor water companies’ performance.
Severn said on Friday it would still have the second-lowest bills in England and would provide £575 million in financial assistance to help around one in six households with their bills.
Russ Mold, investment director at AJ Bell, said: “Severn Trent has to tread carefully if it is to avoid an avalanche of negative publicity given the water services companies’ reputation is in the mud with the British public.”
Last month, the BBC’s Panorama program claimed that Severn Trent artificially inflated its balance sheet by valuing an investment at around £1.7bn when, in reality, it was worthless.
A Severn Trent spokesperson strongly denied the allegations, describing them as “completely inaccurate, misleading and misrepresenting how we operate as a highly listed and highly regulated business.”
Severn Trent has also been criticized for its environmental record, having been fined £2m in February 2024 for ‘reckless’ pollution of the River Trent near Stoke.
In October, analysis by campaign group Windrush Against Sewage Pollution (WASP) said the company made more than 800 alleged illegal sewage spills in 2021 and 2022.
This was despite the Environment Agency giving the company a four-star rating for its environmental performance in 2023, the highest possible grade available.
Severn has cited this rating to continue paying investors massive dividends, which have totaled more than £1.2 billion since 2020.
Mr Mold said: “It is clear that Severn Trent is pleased by the price increases it has agreed to let pass through, although the company will be keen to avoid any hint of presumption.”
But he added that the company “needs to make sure it delivers if it is to avoid renewed pressure from regulators and politicians.”
Severn Trent shares They were 0.85 per cent lower at £24.63 on Friday morning, taking their losses over the past three years to around 15 per cent.
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