Severn Trent said that its first-half performance was in line with expectations despite rain-hit revenue, as it announced the departure of Colin Matthews, its chief executive.

The wet weather in August meant that reservoirs were closer to full capacity, but that consumption was well down on last year, the water utility said in a trading statement this morning.

Revenues were £12 million lower than expected.

Analysts believe that Severn Trent will report full-year revenues of about £1.57 billion in the year to March 31, 2008.

The slump in consumption was offset by a 5.87 per cent rise in sale prices and lower energy costs.

The company said that it was on track to meet Ofwat's cost determination, after allowing for exceptional flood costs in July.

Severn said that the flooding problems delayed the delivery of its plans on reducing operating costs during the current financial year, but its position had been helped by a fall in energy prices, reducing these costs by about £17 million.

Severn also said that its own improvement plans were gathering pace and would “deliver benefits in the years to come”.

Severn Trent, which serves 3.7 million households and businesses, was in one of the worst flooded areas and said in August that the cost of dealing with the damage would be between £25 million and £35 million.

But it said that this would be partially offset by insurance recoveries of between £10 million and £20 million.

The group said that it had completed the integration of its head office and water division and expected to reduce recurring overheads by up to £10 million by the end of next March.

The company also announced the retirement of Mr Matthews, 51, who is to be replaced by Tony Wray, managing director, who will combine his present role with that of chief executive.

The company said that it had always been Mr Matthews's intention to leave once he had sold off parts of the company.

His success in jettisoning Biffa, the waste management company, was marred by missed leakage targets and criticism from Ofwat.

Sir John Egan, the chairman of Severn Trent, said: "Colin has made an outstanding contribution during a period of substantial change.

"We have completed the transformation of the group with the demerger of Biffa, the £575 million special dividend to shareholders and the sale of other businesses such as ST Property and ST US Laboratories."

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