Hundreds of jobs are up for grabs at Severn Trent as profits triple

The company, which provides services to around 4.6m homes and businesses across the Midlands and Wales, stated it is on track to achieve the 'vast majority' of its performance targets

Severn Trent has seen its profits nearly triple in the first half of its financial year, despite failing to meet a crucial drinking water safety standard.

The utility company admitted it will not meet the compliance risk index (CRI), a measure that assesses whether firms are treating water according to regulations. This failure is largely due to issues at a treatment works in Strensham, Worcester, where a new disinfection scheme has been introduced.

Despite this, the company, which provides services to around 4.6m homes and businesses across the Midlands and Wales, stated it is on track to achieve the "vast majority" of its performance targets. Profits for the group soared to £141.4m for the six months to September, and the interim dividend was increased by 4.2% to 48.68p per share.

CEO Liv Garfield expressed pride in the company's achievements in meeting other regulatory targets on leaks and blocked drains, as well as earning a four-star rating from the Environment Agency for five consecutive years. However, she acknowledged there is more work to be done, with plans to invest between £1.3bn and £1.5bn on improving its network of pipes, drains and sewers over this financial year.

According to most regulator metrics, Severn is one of the better performing privatised water companies, and exceeded performance targets set by Ofwat last year, the watchdog confirmed in October.

The firm also announced it's on a hiring spree for 450 new staff this month, aiming to replace nearly 870 miles of ageing water pipes by the end of the decade. Severn is confident the new pipes will endure for up to a century and help achieve its goal of slashing leaks by 16% by 2030 and halving them by 2045.

Despite these efforts, the industry has faced public fury over pollution issues, soaring bills, and hefty dividends, alongside executive pay and bonuses. Earlier in the year, Severn was slapped with a fine exceeding £2m for contaminating a stretch of the River Trent near Stoke between late 2019 and early 2020, an incident the Environment Agency deemed "fortunate" for not resulting in "catastrophic pollution".

The company claims it has fitted 900 storm overflows in the past five years, reducing spills by 15% during the latest regulatory period from 2019 to 2024. It's also petitioned Ofwat for permission to hike the average consumer water bill by 46% over the next five years compared to current rates.

The regulator's final decision on sector-wide bill increases is expected in December. Importantly, Severn's investment plans for this year and its recruitment drive are not dependent on the approval of the 46% bill hike.

Russ Mould, investment analyst at AJ Bell, weighed in: "The big increase in profit at water utility Severn Trent may sit uncomfortably with the company’s admission it will miss some water safety performance metrics this financial year."

He also noted the environmental concerns: "Pollution in Britain’s rivers and seas and the travails of Severn’s unquoted peer Thames Water mean this sector’s name is mud with many."

Yet there's a glint of hope for shareholder relations: "However, a modest increase in the dividend and the improved financial performance may be enough to get some investors back on side."