Britain's water services group Severn Trent Plc reported a 51 percent fall in pretax profit for the six months ended September 30 and it slashed its interim dividend by 2.5 percent to 26.04 pence.

The group introduced a new dividend policy for the period between 2011-12 and 2014-15.The board has decided that the dividend policy for Severn Trent for the period should be RPI plus 3 percent, the group said in a statement.

The group is organised into two main business segments. Severn Trent Water provides water and sewerage services to over 3.7 million households and businesses in the Midlands and mid-Wales. Severn Trent Services provides services and products associated with water, waste water and contaminated land principally in the US, UK and Europe.

Pretax profit fell to 101 million pounds ($160.7 million) from 208 million pounds in the same period of last year. The group reported losses of 74 million pounds arising on interest rate swaps for the first half, compared with gains of 26.9 million pounds in the year-ago period.

Underlying pretax profit fell 16 percent to 158.0 million pounds, despite real price reductions at Severn Trent Water, the group said.

Severn Trent said cost reduction efforts, through component sourcing to lower cost areas, continue to make gains. The order book remains strong and about 70 percent of orders in hand are scheduled to ship this fiscal year.

Turnover rose 1.9 percent to 867 million pounds.

Severn Trent said it is approaching the end of a significant period of change. We are well placed to achieve higher levels of operational excellence and progressive, sustainable returns to shareholders, which underpins our new dividend policy, the group said.

Shares of the FTSE 100 company are trading 0.14 percent lower at 1,457 pence at 08:51 am GMT Tuesday on the London Stock Exchange.

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