Severn Trent hikes dividend despite balance sheet concerns
Severn Trent, one of the UK’s biggest water companies, has announced plans to hike its full-year dividend despite coming under fire for allegedly inflating its balance sheet using an accounting trick.
The utility was accused by BBC Panorama last month of claiming a £1.68bn investment in its accounts which in reality had no value to the overall business. It describes the allegations as “completely inaccurate.”
Severn Trent on Friday said dividends would rise from 121.71p to 126.02p in 2025/26, in line with inflation. It plans to increase dividends in line with inflation going forward.
In a trading update following Ofwat’s much-anticipated final determination on bills, the London-listed firm said it was “on track” and expected to perform in line with guidance.
It also said it expected to see a benefit of £100m from Outcome Delivery Incentives (ODI) in 2024, a framework that provides companies with rewards for hitting performance targets and compensates customers if performance is sub-par.
Ofwat’s final determination in December, which set customers’ bills for the next five years, means the typical water bill in the UK will rise by an average of £86 from April.
Water companies had fiercely lobbied for greater bill hikes which they say is essential to fixing creaking infrastructure amid long-running concern over sewage spills. However, six of the UK’s biggest water firms, including Severn and embattled Thames Water, are also facing a multi-billion lawsuit which accuses them of under-reporting sewage discharge and overcharging millions of customers.
Severn Trent said on Friday the final determination would enable it to reduce pollution by 30 per cent and deliver a 16 per cent reduction in leakage.
Some 1,400km of water mains are expected to be replaced, alongside investment in 70 waste treatment works.
“We will deliver this step change in investment while maintaing the second lowest bill in England and supporting around one in six customers with their bills through a £575m affordability package,” a statement from the firm reads.
Shares are trading down 1.95 per cent over the last 12 months. Severn Trent in November reported a nearly tripling in half-year profit and raise dividends from 46.7p to 48.7p.