Thames hits performance pledges and ups pre tax earnings 20%

Thames Water picked up £16.4m in outcome delivery incentive penalties offset by £3.1m in rewards in the year to 31 March 2016 while achieving targets for the rest of its 55 performance commitments. Chief executive officer Martin Bagg highlighted the performance as part of “a strong start” to AMP6. Reported profit before tax for 2015/16 was up 40% at £511.2m with the underlying figure, excluding derivative gains and losses, showing a 20% increase year on year.

The outcome delivery reward was in short-term supply interruptions. The penalties were incurred for sewer flooding properties (£11.7m) and long-term supply interruptions (£4.7m).

Thames reported totex efficiencies of £31m after growth in operating costs of 1.5% to £1,419m was outpaced by a revenue increase of 2.5% year on year to £2,039.5m. Revenue was lifted by inflation and a small increase in numbers of domestic customers along with reallocation to the year of the report (reprofiling) of allowed revenue from later years of AMP6 “to avoid volatility in bills.”

The company introduced a new debt management scheme during the year of the report. And bad debt change year on year fell from 3.6% of revenue to 3.2%.

The final of three alliances with supplier partners was completed in the year to address capital investment and operational management and technology transformation. The company said the alliance model would streamline its delivery of some £2.8bn in capital programmes. “Our next priority will be to exploit opportunities for the alliances to align with each other to encourage further savings and innovation,” said Baggs.

Operating profit was lifted about 10% to £742.2m on the previous year by higher revenues and sales of land and equipment.

Finance gains were down £2.5m on the previous year at £86.1m while interest on loans and other financial expenses were down £16.2m at £343.3m. Net gains on derivatives were £26.2m compared with a £40m loss in the previous year.

Full report here