Costs hike pegs operating income at Thames Water

Thames Water reported operating profit down £60m to £429m for the year to 31 March 2022. The fall reflected a £103m increase in operating expenses to £1,843m and a £26m decrease in other operating income as well as greater depreciation and amortisation arising from growth in capital investment in its network.

The 6% shift in operating expenses reflected a £35m increase in employment costs; a £44m increase in power costs driven by power price inflation. Those were offset by a £24m decrease in other operating expenses including lower business rates; a fall in the company’s bad debt charge; and a £16m decrease in exceptional, non-recurring business restructuring costs.

Earnings before interest, tax, depreciation and amortisation (ebitda) at £1,029m – were up 0.5% from the previous year. Revenue was up 3% year-on-year at 2,177m.

A loss before tax for the year of £851m, up by £609m from a pre-tax loss of £242m in the prior year, was driven largely by a £373m hike in net losses on financial instruments at £896m. A £176m increase in net finance expense to £385m was chiefly the impact of inflation on index linked borrowings and swaps.

For the fifth consecutive year, Thames paid no dividends to external shareholders of the group. Chief financial officer, Alastair Cochran, said: “We are fortunate to have shareholders that have consistently supported Thames Water by approving substantial investment in the business over and above regulatory allowances, whilst taking no dividends out of it.”

The reported figures included revenue of £85m at the independent company responsible for the construction of the Thames Tideway Tunnel, Bazalgette Tunnel – up from £74m in the previous year. .