Severn Trent says it will soon be worth £8 billion

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SEVERN Trent dropped a hint on how much it would expect its suitors to offer for the company yesterday when its annual results said its official valuation was approaching £8 billion.

The company, which supplies 4.2 million households and businesses across the Midlands and parts of Wales, recently rejected a rumoured £5.3bn approach from an overseas consortium headed by Canadian infrastructure investment group Borealis on the grounds that it undervalued the business. City analysts expect Borealis to persist in its advances but Severn indicated a successful offer would have to be much higher.

The company, which saw pre-tax profits jump 37.2 per cent to £215.2 million in the year to the end of March, said plans to invest £2.6bn in its infrastructure over the current regulatory period should see its official valuation as measured by watchdog Ofwat growing to £8bn by March 2015. It otherwise remained tight-lipped about the takeover attempt.

Chief executive Tony Wray said: “Our focus on continuous improvement has once again delivered a good financial and operational performance.

“We expect to invest around £600m to £620m this year to further improve our operational performance and service levels.”

The rainy summer meant farmers used less water than usual, but price hikes of 5.2 per cent offset falling water use to lift turnover 3.4 per cent to £1.83bn.

Severn hiked its full-year dividend by 8.2 per cent, and said dividends will grow 6 per cent this year despite its investment plans.