Thames Water is prioritising investment in improving its network over external dividends, according to results for the full-year ended 31 March 2019 published today.

Annual investment during the year was £1.2 billion - three times the annual investment compared to the five years pre-privatisation. Underlying operating profits fell to £454.0 million (2018: £505.9 million) , while underlying profit before tax also fell to £51.6 million (2018: £137.4 million, excluding profit on the sale of Thames’ non-household business). Revenue also fell to £2.03 billion, compared to £2.08 billion in 2018.

Total operating expenses  increased by £60.4 million (3.8%) to £1,655 million, compared to £1,594.6 million in  2018.

Factors which contributed to the increase include:

• A £16.3 million increase in power costs as a result of a 15% increase in the unit price, coupled with higher water treatment volumes during the hot and dry summer. Thames had to bring additional (and more operationally expensive) sites online over the summer to deal with the demand.
• An increase in employee costs of £45.0 million
• Increase in spend to find and fix leaks in order to get leakage performance back on track.

The extreme weather during the year contributed to a rise in the number of household written complaints to 21,108 – up from 17,039 in 2018. Thames said:

“At both ends of the temperature spectrum, the 2018 extreme weather events had a lasting impact on our operations, and brought the increasing threat of climate change into sharper focus.”

Brandon Rennet, Chief Financial Officer, Thames Water, said:

“Every line of our results demonstrate that we are a business working as hard as possible to meet its commitment to our customers, the environment and our stakeholders. Our capital expenditure last year increased to £1.2 billion. We spent a record amount to reduce leakage and no dividend will be paid to external shareholders, again, as we prioritise improving our network and customer outcomes by innovating and utilising the latest technology.

"Over the past 15 years we have invested around £15 billion – the average annual spend is triple the average annual amount spent in the five years prior to privatisation. As a business, it is important that we are as efficient and productive as possible, so that every penny we spend is maximised for our customers benefit.”

Commenting on leakage, the water company said it was spending £1 million a day in leakage prevention and network maintenance activities. Thames is expecting its leakage performance to continuously improve in 2019/20, with an average of 1,500 repairs completed every week.

Thames said it is making a significant investment in a smarter, digital network, including smart meters and sewer depth monitors, commenting:

“The digitalisation of our network underpins the delivery of our plans for the future. In the past couple of years we’ve driven a step change in our digital story. By creating a smarter network, we’re able to be more targeted in our approach to maintenance and repair, driving cost and operational efficiencies, and protecting our customers from faults on our network.”

To date Thames has installed almost 1,000 sewer depth monitors to help better understand how the waste network is flowing. With a total of 200,000 due to be installed by 2025, the utility said it is already seeing positive results. In 2018/19, 179 blockages were detected by the monitors and there was a 3% reduction in internal sewer flooding incidents.

Thames has also installed 27,183 acoustic loggers, which help pinpoint leaks in its water infrastructure - the new technology detected 45.68 Ml/d during 2018/19.

Of 55 performance commitments set with Ofwat, of those with targets for the regulatory year, the utility achieved green status for 54%, 12% were amber and 34% were red (2017/18 61% green, 19.5% amber, 19.5% red).

In May 2019 the company announced Steve Robertson was stepping down as Chief Executive Officer - following his departure, the search for a new chief executive officer is currently continuing.

Commenting on the results, acting Interim Executive Chairman Ian Marchant said:

“We have a lot to be proud of. Our drinking water quality remains high, we protected customers from supply restrictions during the hottest summer on record and we reduced internal sewer flooding. Our average annual combined household bills remain amongst the lowest in England and Wales. However, overall performance was mixed. We reduced leakage but not by as much as we wanted to, given the extreme weather events. This also helped push up complaints. These remain two of our top priorities.”

Thames Water completes Board and governance review

Thames Water has also today separately announced the appointment of two non-executive directors, completing a major review of its governance designed to rebuild trust and increase transparency.

Michael McNicholas, a former CEO of Ervia, Ireland’s national gas and water utility, and Paul Donovan, a former senior Vodafone executive, who take up their positions next week, are among seven new Board appointees over the past 16 months.

The review was launched by Ian Marchant, when he joined as independent chairman in January 2018.

At £398 a year in 2019/20, Thames Water's household customers have benefitted from the third lowest average combined water and wastewater bill in England and Wales, 4% below industry average