Severn Trent sees profits sink

Ofwat's record fine ate into profits

Severn Trent has reported a decline in yearly profits due to a record fine by regulator Ofwat and the effects of last summer's floods.

Profit dropped to �192.4m for the year to 31 March, a 41% decline on the previous year.

Severn Trent was fined �35.8m in April for deliberately providing false information and for poor customer service in the period up to 2005.

The firm services eight million people in the west of England and Wales.

Improvements

Excluding exceptional charges of �68.8m, the firm's underlying profits rose 15.8% to �469.5m.

Exceptional items included �13.6m to cover last summer's floods after the Avon and Severn rivers burst their banks.

The company also incurred a one-off charge of �13.9m as a result of efforts to improve its processes and staff training, action which it says has cut written complaints by 34% in the past 12 months.

"These results demonstrate continuing improvements across the business," said chief executive, Tony Wray.

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

Severn Trent was fined a record sum recently for lying about its performance and is awaiting a second fine relating to false leakage data given to Ofwat in 2001 and 2002.

Mr Wray said the case was expected to be completed and a ruling handed out in early July, though Severn Trent had not set aside provisions for the impending penalty.

The company has stressed that the errors took place under previous management and that internal controls have since been improved.

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