Thames Water has reported a £54m loss and zero dividend payment to external shareholders – but has had to pay a £28 million dividend to its immediate parent company to service third party debt obligations, according to its interim results for the six months ended 30^th September 2019.

According to the latest set of iinterim results for the first half of financial year 2019/20, the company had £54.3 million underlying loss before tax (Sept 2018: Profit £42.4 million), driven by bi-annual revaluation of hedging instruments to current market prices.

As part of its commitment not to pay dividends to external shareholders for the three years to 2019/20, Thames paid zero dividends to external shareholders but has had to pay the £28.0 million dividend to immediate parent company Thames Water Utilities Holdings Ltd to service third party debt obligations.These dividends were ultimately used by other group companies to service external debt obligations of the group.

Most of the firm’s external shareholders are pension funds – its two largest shareholders are Canadian pension fund manager Omers and the Universities Superannuation Scheme.

The net deficit on Thames' own defined pension benefit schemes has increased by £30.7 million to £323.7 million

The utility had total revenues of £1.1 billion over the period (Sept 2018: £1.0 billion) and saw an increase of £301.2 million in underlying operating profit (Sept 2018: £224.0 million), partly attributed to an increase in revenue and other operating income.

Thames is reporting the successful transition of three quarters of its household customer accounts to new relationship management and billing platform, with most accounts on track to be migrated by March 2020.

The number of customers on its Water Sure Plus social tariff to has more than doubled to 114,000, providing them with a discount of up to 50% off what is the third lowest combined bill in England and Wales. Nearly 75,000 customers in vulnerable circumstances are currently being helped through Thames Water’s priority services register, up 7% since the start of 2019/20.

The company said it is delivering a transformational investment programme, reporting an 11% year-on-year reduction in average leakage, from 683Ml/d to 606 Ml/d – its biggest reduction in 20 years - after increasing resourcing and productivity, implementing better prevention and detection methods and improved measurement techniques.

The firm invested nearly £600 million during the period in above and below ground assets to boost resilience, in projects such as upgrading water mains, metering, site security and connecting its network to the Thames Tideway Tunnel. Thames has also continued to modernise its ageing network, rehabilitating 81km of water mains during the six months – around 62% of its pipe network is more than 60 years old.

Other operational highlights the utility is flagging up include:

• Increase in water quality with 99.98% compliance with Drinking Water Inspectorate measure
• Reduced internal sewer flooding incidents by 13% year-on-year
• Total pollution incidents from January to September: 212 (January to September 2018: 217), with 8 category 2 (January to September 2018: 6). Continued focus to drive step change in reduction
• 31 water fountains installed to date across London in partnership with the Mayor of London
• Re-opened a London cycle route made from the equivalent of 1 million recycled plastic bags
• Conducted 37,430 smarter home visits, saving 2.75 million litres of water every day. 270,000 visits since the programme launched in 2015, with over 22 million litres of water saved each day
• Three per cent year-on-year reduction in greenhouse gas emissions
• Generated a total of 162.42 GWh of renewable electricity, a 6.5% year-on-year increase, and the equivalent of £17.8 million in electricity costs, including 151.45 GWh of electricity from sludge

Good progress in restructuring business to drive cost and operational efficiency

Ian Marchant, Interim Executive Chairman, Thames Water Utilities Limited, said:

“We’re making good progress against our key priorities including leakage, which is down 11% year-on-year, after sharpening our focus in a number of areas. We’re now fixing an average of more than 1,400 leaks every week, thanks to the hard work of our expanded teams and the use of big data and innovations. This is encouraging progress and we’re committed to keeping up the positive momentum. We will continue to put our resources into maintaining this level of performance over the crucial winter period, when colder temperatures make reducing leakage even harder.

“As we near the end of a challenging price review process, our long-term investors continue to support the prioritisation of historically high investment levels over the taking of dividends. We remain resolutely focused on maximising the benefit of every pound to create value for our customers, communities and the natural environment, amid the challenges of climate change and population growth."

Looking ahead to AMP7, Thames’ new Capital Delivery Director John Bentley said one of his first priorities is to ensure a smooth and effective transition from the eight2O alliance model, which has delivered the water company’s AMPcapital programme, to an ‘intelligent client delivery model’. The move will see the utility take more control of decision making throughout the entire delivery process.

“To operate successfully as an intelligent client, we will be increasing our internal technical capabilities over the next few years to ensure we have the right skills to deliver the most effective and cost-efficient capital delivery programme, “ John Bentley added.

Thames Water in advanced stages of recruitment for new CEO

Thames Water is currently in the closing stages of appointing its new Chief Executive Officer following the departure of Steve Robertson from the role in May this year. According to a report in The Times newspaper on Saturday, names in the frame include Basil Scarsella, current Chief Executive at UK Power Networks. The Times quoted Brandon Rennett, Finance Director at Thames, as saying that an announcement would be made in the very near future “after a “very thorough search” had thrown up a very high-quality shortlist.”

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