More leaks but water profits soar by 30% at Severn Trent

More leaks but water profits soar by 30% at Severn Trent

Severn Trent, the water company under criminal investigation over allegations of false reporting, posted a 30% increase in water profits yesterday while admitting it was losing 512m litres a day from leaks.

The company, which is being investigated by the Serious Fraud Office (SFO), made £400m operating profits from the core water business. The figure would have been higher but for the £10.6m the company had been ordered to hand back to its customers this year. The regulator has told it to return £42m over four years.

Full-year pre-tax profits were £270m, up 18%, on turnover up from £2bn to £2.3bn. It admitted water lost through leakage had risen 3%. Colin Matthews, chief executive, said: "A dry summer, followed by a winter with short but severe cold periods creating ground movement, has driven higher volumes of bursts."

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The poor record on leaks is revealed as a House of Lords sub-committee on science and technology has severely criticised water companies in a hard-hitting report. Mr Matthews said the company planned to spend £90m on upgrading its water infrastructure in the coming year, £18m more than in 2005-06.

Severn Trent came under investigation by Ofwat and then the SFO last year after a whistleblower alleged that the company had mis-stated its leakage figures. The company has since apologised but said yesterday it had made no financial allowances in its latest figures for any possible fine. "No reliable estimate can currently be made of the amounts that might become payable as a result of the SFO inquiry, Ofwat's final conclusion in respect of the allegations of false reporting or its review of customer relations data," it warned in a statement.

The water group underlined its determination to concentrate on water and sewage yesterday by demerging the British arm of its Biffa waste disposal business. The Belgian side of Biffa, which has been caught up in allegations of a tax scam, is being sold to a local company, Veolia. £4m has been set aside for this but Severn said no provision had been made for any possible criminal penalties.

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