Severn Trent’s profits fall

The water company, which serves eight million customers in the heart of the UK, matched last year’s leakage performance but failed to meet regulator Ofwat’s reduced benchmark of 483 megalitres per day for 2010/11.

It blamed its first above-target leakage performance for five years on two periods of freezing temperatures followed by a thaw and pledged to invest more money to make its system more resilient this year.

The group reported that underlying profits decreased by 14.7 per cent to £288.6m in the year to March 31, with revenues in its regulated water business up 0.3 per cent to £1.4 billion after Ofwat imposed a 0.7 per cent drop in prices.

The regulator has the power to fine firms that fail to meet leakage targets, with potential penalties up to 10 per cent of their turnover. Last year, six companies failed to meet their targets and were the subject of increased reporting requirements while they improved their performance.

Yesterday, North West Water operator United Utilities said the “extraordinary efforts” of staff had enabled it to meet its annual leakage target.

Tony Wray, chief executive of Severn Trent, pointed out that the company had volunteered a lower leakage target than the one proposed by Ofwat: “It was the coldest December for 100 years and the outbreak of burst pipes was pretty huge.

“We kept our leakage as low as last year, which was a record low for us.”

Severn does not currently expect to impose hose pipe bans on its customers despite the “unseasonably dry” weather, he added.

But the company would continue to monitor the situation and was encouraging its customers to use less water, while driving down its own leakage rate.