Profits tumble at Thames as sales slide and costs climb

Thames Water reported a 17% year-on-year fall in operating profit to £489m for the year to 31 March 2021 attributed largely to a fall in revenue and a costs hike.

Total revenue for the year was down 3% on the previous year’s sales to £2.033bn as a result of the impacts of lower allowed income under AMP7 and Covid’s hit on the business market, offset in part by increased household consumption during lockdown. These were also offset by a £9.5 m lift in revenue to to £73.8 million at the Thames Tideway Tunnel construction operation Bazalgette Tunnel (BTL).

A £72m increase in operating expenses was mainly down to £31m increase in depreciation and

amortisation; a £27.8m rise in employment costs; and a £23m hike in rates following a rebate of a the same amount last year.

Financial income more than doubled from the previous year to £188m while financial expenses were down £29m to £396m.

Net loses on financial instruments of £522m created an underlying loss before tax for the year of £315m – down from underlying pre tax income of £187m in the previous year. Underlying figures excluded pre tax profits at BTL of £73.6m – up from £64m in the previous year.

Thames fell short on 23 of its 49 performance commitments including customer experience and developer experience for which it was penalised a total of £18m. Added to those were penalties totalling more than £35m for failing to meet Outcome Delivery Incentive (ODI) commitments. They included a £10.56m penalty under its sewer flooding ODI; a £10.12m for a failing on water supply interruptions and. £5.22m penalty for shortfalls in clearance of blockages.

Thames reported an overall increase in bad debt costs of £12.7m to £86.6m primarily due to the impact of Covid-19 on its cash collections.

All Thames’ dividends were paid to service debt obligations and working capital requirements of other companies in its parent, Kemble Water Group. External shareholders – those with stakes in Kemble Water Holdings – received no distributions.