Thames reports investment up 20%

(by Verity Mitchell)

Thames Water has reported full-year results to March 2026. Underlying revenue was £3,616m, up 39% compared to the prior year. Operating profit of £1,212m was up 131%, driven by allowed price rises for AMP8 and lower depreciation, amortisation and asset impairment charges.

Underlying profit after tax was £204m. Thames incurred exceptional costs of £231.6m, of which £138m were debt advisory fees and £62m were restructuring, legal and advisory fees. Its cost of interest rose to 5.7% from 5.1%, reflecting the higher costs of its emergency funding. Thames Tideway contributed £140.7m of profit. Thames invested £2,680m of capex, up 20%, to drive improved performance. Its debt/RCV remained at an elevated level of 86.1% from 84.4% in the prior period. It paid no dividends.

The statement from the company’s auditors included a number of issues of concern or uncertainty: a material uncertainty related to Thames as a going concern; the valuation and accuracy of accounting for the ‘accordion’ debt facility; the recovery of intercompany balances;  provision for expected credit losses of £201.8m; the classification of opex and capex costs; and the valuation of derivatives.

In terms of performance, Thames made progress. It met its target for mains replacement; installed 245,261 smart meters; reduced total pollutions by 18% (still 41% behind target) and serious pollutions by 27%. Leakage was down 15% since the baseline of 2019/2020 (target 21.3%). 

Regarding AMP8 progress, 76% of year two projects have been contracted, and £744m of efficiencies have been created. Management explained that missing two targets was due to significant single incidents: Compliance Risk Index (CRI) because of failure at one treatment works; and supply interruptions because of one significant issue in Witney. Its network suffered 38% more bursts, from dry weather-related ground movement.

Although it met 55% of Ofwat’s common performance commitment targets, up from 38%, Thames incurred £140m of Outcome Delivery Incentive penalties. Management flagged that going forward, new Environment Agency reporting standards will result in ‘hundreds of millions of pounds of penalties a year’. Chief executive Chris Weston commented that transformation of the utility “will take at least a decade”.