Thames Water’s pre-tax profits have recovered to £335.8m (2013/14: £259.3m) due to stable weather conditions, reduced financing costs and operating efficiencies, according to its full year results for the year ended 31 March 2015.

Dividend payments fell, with total dividends paid of £169.9m (2013/14: £208.5m) to the immediate parent company. £69.9 million was utilised to service the Group’s debt obligations and £100 million to compensate Thames Water’s shareholders for their capital investment.

During the period the firm saw a record £1.4 billion investment  in infrastructure – the highest of any UK water company. Total revenues grew by 4.3% to over £2 billion, primarily driven by the annual allowed price increase and a slight rise in water consumption attributable to population growth.

Thames’ AMP6 business plan for 2015-20 will see a total of £8.5 billion in financial and operational commitments. The wholesale divisions will spend a combined total of £7.6 billion split between £3.4 billion to protect and improve water supplies, £4.2 billion to safeguard and enhance the delivery of wastewater services and deliver interface connections with the Thames Tideway Tunnel.

The company said customer satisfaction scores had also increased from 4.2 (out of 5) in the first quarter to 4.4 by the final quarter to 31 March 2015. A report by the Consumer Council for Water in September 2014 separately highlighted a fall in written complaints to below industry average levels.

However, as part of the PR14 final determination Ofwat imposed a penalty totalling £119 million due to overall levels of customer service falling below Ofwat’s expectation and less than satisfactory performance of underground wastewater assets in the same period.

The company said its financial performance had underpinned a number of key accomplishments over the last 12 months, including:

Customer

A reduction in the number of customer complaints by 6% from the previous year, and 40% since 2011. Over the year, Thames implemented a business transformation programme to increase the number of customer facing roles and improve satisfaction levels.  In September, it launched an online account management system to enable customers to manage their transactions electronically

Operational

Drinking water quality continues to be ranked among the best in the industry and Thames outperformed regulatory targets for leakage reduction, down a third since 2004, for the ninth year in a row. The £190m upgrade of Beckton sewage works and tunnelling stage of the Lee Tunnel is now complete.

However, Thames said that it recognised that its below ground wastewater assets had not delivered against the expected high service performance due to unusually high levels of sewer flooding. The water company  said it has identified and implemented process improvements, committed additional resources and increased targeted sewer cleaning activities to address the issue.

The target to self-generate 33% of power in-house by 2020 is on track. Thames has signed a long-term deal with Haven Power as part of its commitment to using 100% renewable energy. Thames is also commissioning more efficient energy generation plants to be delivered in AMP6 which once fully operational, will reduce dependency on grid electricity by over 10%. Absolute greenhouse gas emissions rose by 11.5% compared to 2013/14.

Tideway Tunnel

In September, the Thames Tideway Tunnel received a Development Consent Order from the Government. The procurement process to select the company to finance and build the tunnel is now in its final stages. The Tunnel  is currently managed as a separate division - from summer 2015, Thames expects the project to be owned and managed by an independent infrastructure provider with interface obligations managed by Thames’  wastewater operating company.

Of the projected £4.1 billion spend (excluding inflation), Thames Water is responsible for a £1 billion net spend on acquiring land and interfacing costs to connect the Tunnel to its existing network. The remaining £3.1 billion is to be funded by the infrastructure provider who will own the tunnel and have its own licence from Ofwat..

The tunnel, which will take seven years to build with main construction due to start in 2016, will directly create over 4,000 jobs and further indirect employment opportunities to become one of the biggest employers in London

Financial

Thames Water’s key credit ratings have been affirmed as stable by Moody’s following the acceptance of Ofwat’s final determination for the price review period 2015-20 in December.

New business model 

In March Thames Water implemented a new business model , switching from a centrally structured company to four accountable operating companies (divisions) each fully responsible for its own planning, operational and investment decisions. Each division has its own separate managementstructures and executive teams in place in for each of the following operating companies:

• Retail household
• Retail non-household
• Wholesale water
• Wholesale wastewater

The move followed on from its Business Transformation Programme, which is still ongoing.

Commenting on the results, Martin Baggs, chief executive of Thames Water, said:

“Customers are at the heart of all we do and I’m pleased our hard work to improve service is paying off, with satisfaction scores up and complaints down. It’s also encouraging to see this positive, sustainable trend continuing as we enter the new regulatory period.”

“Our bills remain the third lowest among water and sewerage companies and the work to improve our ageing infrastructure to make it fit for the future continues seamlessly thanks to record levels of investment.

“Our key focus for the next 12 months, as we start a new regulatory period with challenging targets to meet, is to ensure we continue to build on our customer service improvements, create an even safer working environment and effectively implement our industry-leading investment plan.”