Thames Water has published its annual results for the year to March 2022 – commenting on its performance, Sarah Bentley, Chief Executive Officer says “we know our performance isn’t yet where it needs to be, and we are only at the beginning of our turnaround journey. However, there are early signs we’re on the right path.”

Just over a year into an eight-year turnaround plan, major milestones include bringing the maintenance of the company’s water network in house, bringing all customer-facing telephone teams onshore in the UK, achieving the leakage target for the third year in a row and a record £1.3 billion investment in assets during the year.

According to the annual results, Thames has delivered solid underlying results in challenging inflationary conditions. Revenue during the year rose 3% to £2.2 billion, driven by growth in allowed tariffs and a partial recovery in non-household consumption as UK Government Covid-19 restrictions eased. The utility has invested a record £1.3 billion, representing a 22% increase as Thames ramps up its capital delivery programme to improve resilience.

EBITDA remained unchanged at £1.1 billion, reflecting high ongoing supply chain inflation, while the reported loss after tax of £973 million was primarily driven by a non-cash loss on financial instruments and a one-off deferred tax charge due to the increase in corporation tax rate to 25%.

The company is reporting strong growth in operating cash flow, benefitting from improved cash collection rates, and decreases in working capital and pension contributions. No dividends have been paid to external shareholders for fifth year running, with a £37 million distribution made to service group debt. Shareholders have committed £500 million in new equity in 2022/23 to support delivery of the revised business plan; Thames new Executive team is working with shareholders on plans to provide a further £1.0 billion of equity funding (which will be subject to certain conditions) over the rest of the current regulatory period.

With strong turnaround expertise, the new team is now in place. Alastair Cochran, Executive Director/Chief Financial Officer at Thames Water said:

“The Executive team will continue to reflect the ongoing turnaround in its next business plan for the five-year regulatory period starting in 2025. A focus of that business plan will be to maximise the likelihood that Thames Water receives a PR24 regulatory determination that supports the turnaround. As part of this, Thames Water shareholders acknowledge that further shareholder support may be required to improve financial resilience.”

The company’s revised £11.5 billion AMP7 business plan for the period 2020-25 was recently approved unanimously by shareholders.

Image: Beckton Sewage Treatment Works

Operational performance highlights include:

• Implementing a new operational model to drive regional focus and improve performance for customers and the environment
• Launch of a new work management system to replace 30-year-old legacy systems
• On track to insource management of repair and maintenance of water network by end of October 2022, and for all customer-facing telephone service teams to be based in the UK by end of 2023
• Rolling out programme to reconnect colleagues with values and behaviours, and support increased engagement
• Developing improved engagement plans, recognising the need to deliver a significant change agenda in a challenging economic environment
• Early signs of improving trends in operational performance include:
• Met over 60% of annual performance commitments this year
• Improving trends in majority of customer and operational KPIs
• 43% less household complaints but much further to go on C-MeX - Thames remains 17th out of 17 companies
• 39% reduction in supply interruptions in two years
• 10% reduction in leakage, meeting target for the third year in a row
• 20% reduction in sewage discharges
• Taking action on river health
• Commitment to reduce the annual duration of sewage discharges into rivers across the Thames region by 50% by 2030, and by 80% in sensitive catchments
• £38 million invested in upgrading Beckton sewage treatment works
• Working with partners on a pilot project in Oxford area results in Port Meadow becoming only the second UK river to be given designated bathing water status
• Live spills alerts from 468 permitted locations on track for the end of 2022
• Cooperating fully with both Ofwat’s and the Environment Agency’s ongoing investigations into sewage discharges
• Increased support for customers as they deal with the lingering impacts of Covid-19, and rising energy prices and household costs – over £46 million of support through social tariffs and 5% of households now helped through priority services register
• Pioneering smarter water catchments plans underway for the Rivers Crane, Chess and Evenlode, and facilitating increased investment to improve river quality and biodiversity
• Self-generating 24% of the company’s energy needs
• Progress on road to net zero by 2030 with first direct gas-to-grid project from Deephams sewage treatment works and trialling first electric vehicles

Performance - CEO Sarah Bentley says "we're on the right path"

Commenting on the results, Sarah Bentley, Chief Executive Officer, Thames Water, said:

“Just over a year into our eight-year turnaround plan, we’ve achieved some major milestones. We have a new Executive team in place, reconnected with our values and behaviours, and created two regional teams to become more local in the way we deliver for our customers.  In addition, we’ve started to bring the maintenance of our water network in house and announced that we will bring all our customer-facing telephone teams onshore in the UK.

"Most recently, we’ve announced a revised business plan, unanimously supported by shareholders, which underpins our commitment to delivering improved performance for our customers, communities and the environment. This additional investment, supported by new equity, will go towards improvements to our sewage treatment works for river health, increase resilience in our water network and drive ongoing improvements in customer service.  

"We know our performance isn’t yet where it needs to be, and we are only at the beginning of our turnaround journey. However, there are early signs we’re on the right path with complaints down significantly, a 39% reduction in supply interruptions in the last two years and a 10% reduction in leakage, meaning we’ve hit our target for the third year in row. We’ve also invested a record £1.3 billion in our assets this year to improve our resilience and delivered solid financial results in challenging inflationary conditions.

"We still have a long way to go to turn Thames around. The success of our plan requires determination, collaboration and sustained investment, and I want to say a big thank you to colleagues, customers and stakeholders for your continued support as we build a better Thames Water. We look forward to working with you in the coming year as we progress our plan.”   

Click here to download Thames Water Annual Report and Sustainability Report 2021-2022

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