Severn Trent, the water company facing criminal charges by the Serious Fraud Office (SFO), is expecting that the cost of this year’s flooding could reach as high as £35 million.

The company said today that during the six months to September 30, flooding costs reached £18.2 million after insurance covered £5 million worth of damage.

Severn Trent is still assessing damage to 150 waste water sites and said that it expects charges to range between £25 million and £35 million. Insurance will cover between £10 million and £20 million worth of costs.

During the first half of the year, group turnover rose 3.7 per cent to £774 million but pre-tax profit fell 6.4 per cent to £149.5 million due to rising infrastructure costs and depreciation.

Despite the fall in profit, Tony Wray, Severn Trent’s new chief executive, was upbeat about the company’s performance, stating: “These results demonstrate that our strategy of focusing on water is already showing early signs of success.” Severn Trent shares gained 4p to £14.66 in early trading.

Mr Wray said that the group was set to meet Ofwat targets on operating costs after management undertook a restructuring of the business.

Mr Wray said that the company had achieved a “significant reduction in the levels of leakage” and has a leakage target of no more than 505 megalitres a day. One megalitre is equivalent to one million litres.

Last week, it emerged that the SFO was planning to bring criminal charges against Severn Trent over alleged misreporting of data on leakage between 2000 and 2002.

Mr Wray said that the company will have to wait until the charges are filed at a magistrates court before seeing the details of the allegations. He said: “We have to wait for the full detail and then evaluate it.”

Mr Wray was emphatic that the SFO was not investigating any other charges against Severn Trent.

The company will raise its interim dividend by 6.9 per cent to 24.34p per share.

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