UK floods hit Severn Trent profits

Severn Trent today said costs associated with the summer’s flooding crisis washed away profits growth in the first half of its financial year.

The utility company, which serves 3.7 million household and business customers in England and Wales, posted pre-tax profits of £149.5m (€208.2m) for the six months to September 30, down 6.4% on a year earlier.

Severn Trent took a £18.2m (€25.3m) hit from Gloucestershire’s summer floods - the biggest single incident faced by the UK water industry – but stressed that the financial cost to the company was still to be fully evaluated.

It estimates an overall cost of £25m (€34.8m) to £35m (€48.7m), offset by insurance recoveries of between £10m (€13.9m) and £20m (€27.8m). Today’s one-off charge included £5m (€6.9m) of interim insurance payments.

The unprecedented summer weather saw 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.

Severn bought and made available 50 million litres of bottled water and deployed more than 2,000 staff from Severn Trent Water and its contractors to deal with the crisis.

Stripping out the impact of the flooding, Severn said underlying pre-tax profits increased 13.5% to £161.5m (€225m), ahead of market expectations for a figure of £160m (€222m). Turnover rose 3.7% to £774m (€107m) after price rises permitted by regulator Ofwat.

A week ago, Severn said it faced criminal charges over claims it gave false information to Ofwat.

Severn faces Serious Fraud Office action over three offences relating to data on leakages submitted between 2000 and 2002, although no individual will be charged. The matters relate to a previous management team.