Severn Trent Full-Year Profit Falls Amid Takeover Interest

Severn Trent Plc, the U.K.’s second-largest publicly traded water company, reported a 3.3 percent decline in fiscal full-year profit after high rainfall cut water use and increased operating costs.

Underlying pretax profit dropped to 266.3 million pounds ($404 million) in the 12 months through March from 275.3 million pounds a year earlier, the utility said today in a statement. The figure excludes losses on financial instruments.

Wet weather in the first half increased sewer flooding and lowered consumption, reducing revenue at Severn Trent’s water unit by 19.3 million pounds, the statement showed. The company has been the subject of takeover interest in recent weeks, rejecting an approach from a group including Canada’s Borealis Infrastructure Management Inc., the Kuwait Investment Office, and Britain’s Universities Superannuation Scheme on May 15.

The potential bidders have until June 11 under U.K. takeover rules to announce a formal intention to make an offer. An improved bid could be announced as early as next week, according to a person familiar with the deliberations who asked not to be identified because the talks are private.

Borealis Infrastructure, the Kuwait Investment Office and Superannuation plan to raise their offer and are reviewing today’s earnings to decide how much they should boost the bid, the person said. The group is considering increasing the offer to 2,000 pence to 2,100 pence a share from about 1,950 pence though no final decision has been made, the person said.

Severn Trent Chief Executive Officer Tony Wray, who is retiring next spring from the company that supplies water to 7.7 million people, declined to comment on takeover talks today on a conference call.

Dividend Raised

Severn Trent rose 0.7 percent to 2,049 pence in London trading, bringing this year’s gain to 30 percent and valuing the water utility at 4.89 billion pounds.

The Coventry, England-based company will pay a dividend of 75.85 pence a share for the past year, an 8.2 percent increase. Severn Trent invested 555 million pounds over the fiscal year and expects to spend as much as 620 million pounds in the current period, Wray said in the statement.

The U.K.’s largest publicly traded water company is United Utilities Plc.

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