Thames Water's interim results spark financial resilience probe by MPs

Thames Water reported a 54% year-on-year fall in total profit before tax for the six months to 30 September 2023 to £246m reflecting a £411m drop in fair value gains on financial derivatives to £169m.

Operating expenses were up 9% at £1,053m for the period with operating profit up 31% to £286m reflecting a 12% hike in turnover to £1,270m.

The company reduced its net finance expense by £52m to £209 million largely through higher interest income on swaps and cash invested in money market funds and deposits, which more than offset higher interest costs on borrowings.  

Joint interim chief executives Cathryn Ross and Alastair Cochran called the results “solid” and pointed to improvements in operational priorities and financial performance, together with a record £1bn investment in the period.

However, they admitted: “Turning around Thames will take time. We simply cannot do everything that our customers and stakeholders wish to see at a pace and for a price that everyone would like. We will continue to make the tough choices required to deliver what matters most to our customers and the environment. By being honest about what we can deliver and transparent about what we are doing, we believe we will build the trust and support we need from our customers and stakeholders if we are to succeed in our ambitious plans.” 

The Environment Food and Rural Affairs Committee has called the chair and chiefs of Thames, together with the chair and chief executive of Ofwat, in to give evidence on Tuesday, following the publication of Thames’ results and news reports on the firm’s financial viability.

Ofwat is understood to be scrutinising Thames’ payment of £37.5m to its holding company to service debt obligations. This follows the introduction in May of a licensing condition enabling the regulator to block dividend payments if they would harm a company’s financial resilience. Thames has over £14bn of debt.