Takeover target Severn Trent remained tight-lipped over a £5 billion buyout approach as it posted lower annual profits after investment in its network and falling water usage.
The company, which supplies 4.2 million households and businesses across the Midlands and parts of Wales, recently rejected an approach from an overseas consortium headed by Canadian infrastructure investment group Borealis, but today gave no clues over a fresh bid.
Underlying pre-tax profits slipped 3.3% to a worse-than-expected £266.3 million in the year to the end of March after it hiked investment in its network by 17% to £555 million and said commercial customers, such as farmers, used less water during a rainy summer - hitting water consumption by 1.4%.
But price hikes of 5.2% during the year offset falling water use to lift turnover 3.4% to £1.83 billion.
Severn's water services arm, which includes water-purifying and wastewater treatment operations, grew revenues 5.3% to £307.4 million, although underlying profits fell 3.5% to £13.9 million.
Severn recently rejected the undisclosed offer from Borealis, the Kuwait Investment Office and Universities Superannuation Scheme as significantly undervaluing the group.
Severn said at the time it "completely fails" to recognise its current and future value, adding that it offered only a "modest premium" to its share price.
But shares in the company have held up as investors expect the consortium to return with a higher bid.
Borealis has until June 11 to announce plans for a firm offer, or walk away.
British water companies are prized by investors such as pension funds, sovereign wealth groups and private equity firms for their monopoly over customers and relatively stable earnings, which are tied to inflation.
Severn hiked its full-year dividend by 8.2% despite the profits fall, and said dividends will grow 6% in its new financial year.
The company - headed by outgoing chief executive Tony Wray, who will retire from the group next spring - said it was a "good financial performance".
It added: "The management team of Severn Trent has a clear and focused strategy - by delivering continuous improvement and higher standards we aim to achieve higher levels of operational excellence and sustainable, attractive returns to shareholders."
It plans to invest up to £620 million this year in its network.
Severn is the latest British utility to attract interest after buyouts for rivals Yorkshire Water, Northumbrian Water and Thames Water.
That leaves just Severn, United Utilities and Pennon as the remaining water companies on the public markets.
Severn covers an area stretching from the Bristol Channel to the Humber, and from mid-Wales to the East Midlands. It was privatised in 1989 and takes its name from two of Britain's largest rivers - the Severn and the Trent.
The timing of the buyout approach surprised analysts given that regulator Ofwat rules on prices every five years and will next year decide how much bills should rise by between 2015 and 2020.
Borealis already co-owns the UK's biggest ports operator Associated British Ports and the London to Paris High Speed 1 rail line. It invests on behalf of thousands of Canadian workers and pensioners in the Ontario Municipal Employees Retirement System.
The Kuwait Investment Authority invests the emirate's vast oil wealth, while the Universities Superannuation Scheme invests the pensions of UK higher education workers.
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