THE North-East's biggest water provider has promised an improvement in revenues and profitability as it prepares to raise prices for millions of customers.

In its first results following its move to the main list on the London Stock Exchange in September, the Northumbrian Water Group said half-year profits fell 55 per cent to £15.5m in the four months to September 30 because of higher interest charges caused by a recent acquisition.

Northumbrian already has provisional backing from regulator Ofwat to raise bills for its 4.3 million customers by an average of 9.6 per cent next year.

The group provides water and sewerage services in the North-East for 2.6 million customers under its own name, and water services in the South East, via its Essex and Suffolk Water brand.

Managing director John Cuthbert was upbeat about the prospects for the company, saying the price rise agreed with Ofwat - still subject to public consultation - would lift revenue and profitability.

He said: "The business continues to perform well and our drinking water quality, levels of customer service and environmental protection are among the highest in the country."

As a consequence of yesterday's results, investors will receive a dividend of 2.32p per share.

Finance director Chris Green said the hikes in customer bills, expected to create revenues of £35m in 2004/2005, would not fund dividend payments. He said: "The price rises are a partial restoration of the cash that has not come from operations to date.

"The level of dividend that we pay is well within the model for both Northumbrian Water and also for the sector."

The company had already promised shareholders a dividend payment at the time of Northumbrian's acquisition of Atlantic Water Limited (AWL) in May.

But Andrea Cook, chairwoman of consumer group WaterVoice Northumbria, said the dividend was relatively modest in the context of the proposed rise in bills.

Northumbrian Water said group turnover for the four-month trading period was up six per cent to £182.7m after adding inflation rises to its charges.

The company also announced it was close to raising more than £200m from a long-term securitisation agreement relating to its contract with the Environment Agency to operate the Kielder Water transfer scheme in Northumberland.