Severn opens the dividend tap

FAST-GROWING developments in refuse collection and air quality testing have sent profits leaping at Severn Trent, the FTSE 100 water utility.

The group reported turnover and underlying profits up 9% in the year to the end of March at £2bn and £272m respectively.

That has enabled the company to lift its dividend by 2.5% in the full year to 47.04p, and it pledged that it will not be any lower than that for the current year.

However,the group will have to increase funding of its pension schemes by up to £35m. The bigger pension deficit of £368m clouded the good news.

Colin Matthews, late of recruitment group Hays and gas distribution business Transco, joins as chief executive this summer. He will inherit a business of which 27% is outside the water business but in waste with Biffa and in the US in laboratory services.

The group is still looking for a new chairman after the decision by David Arculus to quit for mobile phones company mmO2.

Operating profits from Severn's core water and sewerage operations across the Midlands rose by nearly 4% to £377m helped by a relaxation of caps on household water bills by regulator Ofwat last year.

Biffa showed operating profits 16% healthier at £79m, though £10m of the increase came from the acquisition last year of rival Hales. One-off costs for restructuring the Hales business came in at nearly £11m.

Restructuring also enabled the group's other major unregulated business, lab services, to post a 13% increase in operating profits to £38 million despite a marginal fall in turnover.