Severn Trent faces a fierce backlash from customers and another fine from the water regulator Ofwat after acknowledging today that it had missed leakage targets for the second year in a row.

It came as the group announced that Colin Matthews, the chief executive, would leave at the end of this year.

His departure date accompanied news that the annual dividend would be £143 million, paid on a near-10 per cent jump in full-year pre-tax profits.

Mr Matthews, who oversaw the demerger of Biffa, the waste management business, last year, is handing over to Tony Wray, at present the head of Severn Trent Water, after only two years in charge.

Severn Trent already faces a fine from Ofwat for failing to achieve customer service standards set by the regulator.

A spokesman for Ofwat said that another financial penalty was possible, given the group’s failure to brings leakages to less than 525 megalitres a day — the equivalent of 218 Olympic-sized swimming pools.

He told Times Online: “Severn Trent is in the process of finalising and verifying its leakage data for submission to us.

“When the data has been independently assessed, we will decide what action we will take.”

Severn Trent said that despite devoting £20 million more to controlling leaks across the Midlands and central England, it was not until March that it had managed to meet Ofwat’s target level, which is set as an average for the financial year as a whole.

The group, which supplies drinking water to eight million people, added: “In due course we will be discussing with Ofwat our ongoing plans and commitments to maintain our progress in reducing leakage.”

Annual results showed that underlying pre-tax profits for the year to March 31 rose 9.5 per cent to £252 million on revenue of nearly £1.5 billion, up 1.7 per cent.

Shareholders will get a total dividend of 61.45p a share, up 7.8 per cent.

Mr Matthews said that the group, which this year announced plans to cut 600 jobs , was now “committed to the single-minded pursuit” of improving Severn Trent Water.

He added: “We have set ourselves ambitious objectives for the coming years and drawn up action plans for achieving them.

“The successful execution of these will radically change our business over a period of years.”

A Severn Trent spokesman said that Mr Matthews's decision to leave reflected the fact that Severn Trent Water now made up “97 per cent of the business” after the Biffa demerger.

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