Water company Severn Trent said half-year profits rose by 10% after operational improvements led to lower levels of flooding and leakage.

The firm, which supplies 4.3 million households and firms across the Midlands and parts of Wales, reported underlying pre-tax profits in line with expectations at £155.8 million for the six months to the end of September.

With customer bills rising 1.5% from April 1, group revenues during the period lifted 2.7% to £947.6 million.

Britain's water firms are waiting for a key December 12 decision from industry regulator Ofwat that will determine customer bills and investor dividends between 2015 and 2020.

In August Ofwat said it wanted Severn Trent's average bills to fall 2.2% a year over the coming five-year period, compared to the firm's earlier proposal of a 1.5% yearly fall.

At the time Severn Trent said it could live with Ofwat's draft proposals.

Severn Trent chief executive Liv Garfield said today: "We are acutely aware that many of our customers are facing difficult times and we have kept our bill increases at or below inflation for five years running, as well as working hard to help customers who are struggling through our range of social tariffs."

The company added that it was planning to launch a new tariff in conjunction with the Citizens Advice Bureau to give discounts to eligible customers of up to 90% on standard water bills.

The City is waiting for Ofwat's final plans to gauge the returns they might make from an industry which due to its regulated nature gives investors clear earnings visibility.

The firm said it maintained "a constructive dialogue" with Ofwat ahead of its December ruling.

Ms Garfield added: "In the light of that we will be able in early 2015 to communicate our future dividend policy."

The firm added that during the period its level of internal sewer flooding fell by 20% while pollution incidents came down by 4%.

The utility said it has spent £247.9 million on operational improvements in the last six months, and was on course to spend £2.6 billion as it comes to the end of its current five-year regulatory programme.

It added that in the second half of the year it would go ahead with its plan, announced last month, to cut 500 jobs from management and support departments. The group employs almost 8,000 people.

Takeover talks between Severn Trent and a Canadian-led consortium broke down in June 2013.

However, analysts at Deutsche Bank said once this five-year review is completed firms in this sector will again become an attractive takeover target.