Devon parasite outbreak: supplier says service nearly restored as it hikes dividend | Water industry

The owner of South West Water has said normal service has been restored for 85% of its customers after unsafe drinking water led to more than 100 cases of a waterborne disease in Devon, as it raised its dividend payout to shareholders.

After cryptosporidium, a disease that can cause unpleasant symptoms such as diarrhoea and vomiting, was detected in the water supply in the Brixham area of Devon last Wednesday, 16,000 households and businesses were told by South West Water not to use their tap water for drinking without boiling and cooling it first.

Pennon Group, the owner of South West Water, said it had offered all customers issued with a notice to boil water compensation of £215 a household via a bank payment or bill credit, costing it £3.5m.

The UK Health Security Agency has confirmed 46 cases of cryptosporidium infection in the Brixham area, while more than 100 other people have reported symptoms, including diarrhoea, stomach pains and dehydration.

On Saturday, South West Water lifted the boil water notice for 14,500 properties in Brixham but apologised after including 28 properties whose water supply was still not safe, causing anger among residents. They were told they could drink tap water, only to receive another message hours later advising them to keep boiling it.

The company blamed a problem with its digital map system for the error and said it offered an extra £75 compensation to people given the wrong advice.

Susan Davy, the chief executive of the FTSE 250-listed company, said: “We are 100% focused on returning a safe water supply to the people and businesses in and around Brixham.

“Normal service has returned for 85% of customers, but we won’t stop until the local drinking water is returned to the quality all our customers expect and deserve.”

She said the company’s operational teams were “working tirelessly around the clock to deliver this”.

Davy added that Pennon had cut its final dividend by £2.4m, equivalent to South West Water’s record court fine last year, “signalling that we are listening”. However, the total dividend payout is still up from last year, at 44.37p a share or £126.9m – compared with £111.7m a year earlier.

South West Water provides water and sewage services to 1.8 million residents in Devon, Cornwall and small parts of Dorset and Somerset.

The company was fined £2.15m last April for pumping sewage into rivers and the sea in a series of incidents across Devon and Cornwall over four years, caused by “numerous common deficiencies” in the implementation of that company’s management systems, according to the Environment Agency.

Pennon reported an underlying profit before tax of £16.8m, the same as last year, and a statutory loss of £9.1m. Underlying revenues rose 10% to £908m, boosted by inflation-linked bill increases. Its debt pile swelled to £3.5bn as of the end of March, up from £3bn a year earlier.

Aarin Chiekrie, an equity analyst at Hargreaves Lansdown, said: “The weather was both friend and foe last year, especially in the second half. Across the south-west, it was the fifth wettest year on record, resulting in rising groundwater levels and increased use of storm overflows.

“These are effectively a release valve to help avoid flooding homes and businesses but it means untreated water ends up in local rivers. On the flip side, the extreme weather has led to a recovery in its water reservoir levels, ending the drought cycle for Devon and Cornwall, and improving the group’s overall water resilience.”

Chiekrie said the company’s revenues would benefit from the increases to bills and also last year’s £380m acquisition of Sutton and East Surrey Water.