One of Britain’s biggest water companies has paid investors a £112m dividend in what has been branded a “slap in the face” for communities hit by sewage dumping.
Pennon Group, the utilities giant behind South West Water, increased payouts to shareholders by an inflation-busting 10.9pc despite failing to turn a profit.
The dividend comes little more than a week after regulators opened an investigation into Pennon’s alleged failure to report sewage leaks.
The increase was also despite the fact the FTSE 100 company posted an £8.5m pre-tax loss on £797m of revenue for the year ending 31 March. It leaves Pennon with just £144m of cash reserves, compared with almost £2.7bn two years ago.
Liberal Democrat environment spokesperson Tim Farron demanded answers from Pennon for paying what he called an “unjustified dividend”.
The MP for Westmorland and Lonsdale said: “This is a slap in the face for communities in the South West facing a hosepipe ban while their beaches are ruined by filthy sewage dumping.
“While South West Water is failing to fix leaks and pumping sewage into our precious coastlines, they’re still handing out bumper dividends.”
The company was fined £2.15m in April for illegally dumping sewage into rivers and the sea in Devon and Cornwall, following an investigation by the Environment Agency that found South West Water culpable for significant environmental harm.
Regulator Ofwat also announced an investigation into Pennon last week focusing on whether its reporting of leaks and water use was accurate.
Pennon has said its figures were “subject to rigorous assurance processes” and signed off by a technical auditor.
Labour’s Jim McMahon, shadow environment secretary, said water companies were being given the “green light” to dump sewage and “simply walk away with bumper dividends and bonuses”.
He said: “The next Labour government will end the Tory sewage scandal by delivering mandatory monitoring on all sewage outlets, introducing automatic fines for discharges paid for by eroding dividends, setting ambitious targets for stopping systematic sewage dumping and ensuring that water bosses are legally held to account for negligence.”
The Government has announced plans to implement legally binding targets to cut sewage discharges into the UK’s rivers and seas.
However, the proposals have faced criticism for allowing water companies to pass the £10bn cost of reducing discharges onto UK households through higher bills. It follows years of underinvestment by predominantly overseas-owned suppliers.
Former Labour minister Ruth Kelly, who is now chairman of lobby group Water UK, has insisted that it would lead to only “modest increases” in bills.
Susan Davy, Pennon chief executive who has given up her annual bonus, blamed the company’s financial losses on “extreme weather”.
She added: “In a year in which the sector has been rightly challenged to clean up its act, we have delivered improvements in environmental performance, building on our sector leading 100pc water quality for our 860 miles of coastline and on track to reduce our use of storm overflows by 50pc by 2025.
“I am also clear that one pollution is one too many, and numbers are falling as we implement sustained change.”
Ed Acteson of campaign group SOS Whitstable said the dividend followed a year when South West Water discharged sewage over 37,000 times, for a combined 290,271 hours.
Pennon, which also owns Bristol Water, said that its dividend rise was only 2pc higher than inflation when measured by the Consumer Price Index including housing costs (CPIH).
The company said that a policy of increasing dividends by CPIH plus two percentage points each year had been agreed between 2020 and 2025. The dividend is less than a third of the environmental investments made during the year by Pennon.
A record £358m was spent on environmental, customer, water and wastewater outcomes during the year, some 50pc higher than the prior 12 months. Pennon plans to invest more than £750m over the next two years.