Profits have soared at water company Severn Trent as it reduced costs over the past year, it revealed today.

Underlying pre-tax profits beat expectations to rise 24 per cent to £338.5 million as turnover rose 3.8 per cent to £1.7 billion. The Birmingham-based company, supplying 3.7 million homes and businesses in the West Midlands and mid Wales, said the profits boost was down to its efforts in controlling costs during the year.

Severn Trent is in the process of moving its headquarters from Birmingham to a £60m new centre in Coventry, which will house 1,700 staff.

Chairman Sir John Egan said the profit hike was: “Achieved through our focus on delivering further improvements in efficiency, processes and standards.”

Severn Trent said it had exceeded its plans for cost savings during the year, while keeping its spending down. Despite this it spent £644.8m on maintenance, improvements and repairs of its pipe network, pumping stations and reservoirs.

Chief executive Tony Wray added: “These results demonstrate that we continue to deliver on our plans, focusing on raising standards, process and efficiency improvements, delivering the lowest possible bills for customers.”

He said the firm had achieved the maximum score for customer service among targets set by the water watchdog, Ofwat.

Over the 12 months to the end of March, Severn Trent’s core water business had put in a strong performance, despite a £3.3m increase in the costs of bad debts during the recession.

The beginning of 2010 had also seen better news for Severn Trent’s water purification business.

Families across the West Midlands have been told their water bills will fall by an average of £13 over the next five years. In November Ofsted quashed Severn Trent’s bid for an increase.

In early trading the good news on profits sent Severn Trent shares up one per cent, or 14p, to £11.73 each.