The demerger of Severn Trent's Biffa business is imminent

The regulator's fine for poor customer service also ate into earnings - reducing pre-tax profits by �3.2m after one-off costs.

Earlier this year Ofwat ordered SWT to spend �170m plugging holes in its pipe network - which lost 540 million litres of water a day in 2005/06.

STW has been allowed to increase bills by 15.2% in return for more investment.

In July Thames Water and Severn Trent were singled out by water regulator Ofwat as the worst offenders for water leaks during 2005/06.

Severn Trent has about eight million customers in three million homes and businesses across England and Wales.

On Tuesday it said it expected to complete the hive-off of its High Wycombe-based waste management business Biffa by 9 October.