Severn Trent delivers third year of service improvement

28 May 2010

• Tangible customer service improvements for third successive year
• Company overcomes harshest winter for 30 years to meet leakage target
• Embarking on £2.5bn of investment in the Midlands over next five years

Customers are seeing the benefits of Severn Trent Water's improvement programme for the third year running as the company continues to improve customer service standards, strengthen its water and sewerage network and make further financial efficiencies.

Publishing its preliminary financial results for 2009/10 today, the company announced that it had made further substantial progress in the areas that matter most to customers, regulators and investors. It reduced customer complaints by 23% and sewer flooding by 24%, also achieving its regulatory leakage target despite the challenges of the coldest winter in 30 years.

The water company increased its profits by 19% to £541 million despite a £6m decline in income from commercial users, and an increase in bad debt charges of £3.3m.

Tony Wray, chief executive of Severn Trent, said: "Despite huge pressures from both the economic and weather environment, we have succeeded in delivering excellent customer service as well as performing well on the financial front. Over the past three years we have reduced customer complaints substantially, tackled sewer flooding and increased the reliability of our water supplies – and we can now add the lowest average customer bills in the UK to that list.

"In 2009/10 we faced the continuing impact of the economic downturn and the big winter freeze, which challenged our operations for weeks on end – and yet we still managed to make substantial improvements that both our customers and investors tell us they value."

Tony Wray added: "Our peers in the utility industry have now recognised our journey of improvement, naming us Utility Company of the Year, and we have completed our 2005-10 investment programme at target efficiency. We believe that we can be the best water and waste company in the UK and that means there will be no end to the search for the improvements and innovations that will make customers' experience of our service even better. Meanwhile, our financial stability means that we can continue to develop and put those ambitions into practice."

Severn Trent achieved record levels of energy generation from renewable sources during the last financial year, producing 176 Gigawatt hours (GWh), some 20.3% of its electricity use in this way – a leading position in the water industry. The company achieved the rigorous Carbon Trust Standard last autumn, and has just won the Best Carbon Reduction Initiative accolade, in last week's Water Industry Achievement Awards.

With turnover up 4.6% to £1,385m and profit before interest and tax (PBIT) for the full year increasing by 18.7% at £541m, Severn Trent Water is still well placed to deliver for customers, regulators and shareholders over the next five years. In 2010-15 Severn Trent is due to:

• Offer lowest average bills – average household bills will fall by 4% (in real terms) by 2015
• Meet challenging efficiency targets to keep bill increases to a minimum
• Improve services, such as stronger network resilience and reductions in sewer flooding – investing £800 per property across our region over the five years
• Invest in assets to ensure that environmental and drinking water quality improvements achieved in the past 20 years are maintained
• Sustain improvements to the water environment, develop sustainable drainage options, and minimise carbon footprint

In addition, Severn Trent is contributing to the evolution of the policy and regulation surrounding the water industry, publishing its 'Changing Course' report last month. This advocates a series of recommendations for government, policy-makers, regulators and the industry itself, including the development of competition through water trading and an improved price-setting process with greater customer involvement. If implemented, these recommendations would hold down industry borrowing levels, reduce carbon emissions and keep a lid on average household bills.

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