SEVERN TRENT REVEALS COST OF GLOUCESTERSHIRE FLOODS

BY ANDREW MERRELL
ANDREW.MERRELL@GLOSMEDIA.ACO.UK

6 June 2008

Last year's floods that devastated the county cost water company Severn Trent £13.6 million, according to the firm.

Together with a hefty fine from industry watchdog Ofwat of £35.8m for deliberately providing false information and poor customer service in a period up to 2005, the double hit resulted in a 40.9% fall in annual profits.

And it may not be the end to the financial blows it suffers.

The company, which provides water to homes and businesses across Gloucestershire, is awaiting a second fine relating to a separate Serious Fraud Office action on false leakage data given to Ofwat in 2001 and 2002.

The flooding was not the focus of yesterday's preliminary results.

The emphasis was on how much its problems related to a previous management regime and how much Severn Trent was doing to meet and exceed current Ofwat targets as a matter of priority.

Chief executive Tony Wray said: "These results demonstrate continuing improvements across the business.

"In particular, customer service standards are rising and we have outperformed against a tougher leakage reduction target."

Nevertheless, profit before tax was £192.4m and the company was able to deliver three per cent real dividend growth.

Severn Trent became indelibly linked to last year's flooding in the minds of many Gloucestershire residents after the rivers Avon and Severn burst their banks and forced the evacuation of the company's Mythe Water treatment works near Tewkesbury.

Full restoration of supplies was achieved after 17 days and saw ST truck in 50 million litres of bottled water and deploy more than 2,000 of its own staff as well as contractors.

Speculative figures released by the company in the wake of the July flooding suggested it could be facing a bill as a result of up to £35m, but yesterday's results show it was able to write off £16m to insurance.