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Severn Trent dividend secure

RESULTS: The board of water utility Severn Trent remained tight-lipped on any potential improvement on a bid from a Canadian and Kuwaiti consortium, but was clear that dividends would continue to beat inflation

Severn Trent (SVT) maintained its inflation-busting dividend policy despite reporting a 3.3 per cent fall in underlying pre-tax profits to £266m due to lower metered consumption and softer commercial demand. After turning down a bid from a Canadian and Kuwaiti consortium, the board of the water utility remain tight-lipped ahead of the suitors 11 June Takeover Panel deadline. However, they were more forthcoming on the dividend policy, saying the payout will increase by 6 per cent to 80.4p this year.

IC TIP: Hold at 2038p

Severn Trent Water saw a 1.4 per cent fall in water usage during the year, but still managed to increase revenues by 3.7 per cent to £1.51bn, after applying a 5.2 per cent regulatory price increase. The water utility spent £555m in capital investments, increasing the regulatory capital value to £7.36bn, with outgoing chief executive Tony Wray adding that the plan is to spend between £600m-£620m in the coming year. Revenues were flat at the non-regulated business, Severn Trent Services, and trading profit before exceptional charges fell by almost a third to £12.7m as water purification and insurance markets proved difficult.

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