Thames, the UK's largest water company, has reported a strong recovery in operational and financial performance in its preliminary results for 2007-08.Thames said operating profits rose 34.4% to £590m, running costs reduced by over seven per cent, investment was up 28% to almost £1bn and it had beaten the target for cutting leakage set by the industry regulator, Ofwat.

Commenting on the results, Thames Water Chairman Sir Peter Mason said:

"These are good results for the company, reflecting the emphasis we have placed  on  increasing productivity and strong financial management. This is the level of performance our shareholders expected when they invested in the company  in December 2006. During the year we have invested almost £1 billion on improving our water and wastewater networks - replacing ancient and worn out infrastructure and adapting to the needs of a growing population. Our operational performance has been excellent.  The quality of the water we supply to our customers is at an all time high, we have hit a  second successive leakage target, and our sewage treatment works are 100 per cent compliant for the first time ever.

"This level of performance has been delivered with major improvements in efficiency. Operating costs were much too high and have been significantly reduced.  This has led to a recovery in profits, which fell in the previous year by eight per cent. The satisfactory profits achieved this year will assist us in investing heavily in future years, to deliver further
improvements in the service we provide to our customers and we will shortly be announcing a major initiative, funded from profits, to share some of the benefits of our success with the customers and communities we serve, in
ways that go beyond our core business activities."

Thames Water Chief Executive Officer David Owens said:

"Thames Water has made strong progress in its first  year under new ownership. Our emphasis on getting the basics right has really paid off, but we had a lot of ground to make up, and we are not about to rest on our laurels. We have a massive programme of investment ahead, and know we must do more to improve the service we provide to all our customers.

"We remain absolutely committed to ensuring we will have enough water to supply all our customers in the future, in the face of population growth and climate change.  We will do this by making further major reductions in leakage, increased  metering and encouraging careful use of water, as well as developing additional water resources where necessary.  It is equally important that we make further reductions in the number of homes threatened by the awfulness of sewer flooding."

Tackling  leakage remains the company's top priority.  The company is confident it has outperformed its leakage target for the second consecutive year, bringing leakage  down to around 713Ml/d.  Half of London's mains are over 100 years old, with a third over 150 years old. The rolling programme of replacing  these  ageing  Victorian  pipes has been accelerated and is currently active in 580 streets in London.  Around 527km of  new pipework has been laid this year, compared with 323km in 2006/07.

The current programme, which runs to 2010, will reduce leakage by around a third. This work has also contributed to a reduction in the number of burst mains, and consequent  disruption, in central London. Across the whole of the  company's area, a total of around 630km of water mains have been replaced,  more than double the regulatory target of 293km. The company has also exceeded regulatory targets for meter installation, fitting over 13,000 meters on change of occupancy and over 21,000 at customers' request.