Thames Water may have to restate its accounts for the finalcial year ended March 2024, according to a report in the Financial Times at the weekend.
The accounts, which were signed off by the water company’s external auditors PricewaterhouseCoopers (PwC), showed that underlying profit after tax was £140 million in the period, a £272 million improvement compared to the loss after tax reported in the previous year 2022-23. Total profit after tax was £75 million for the year ended 31 March 2024, an increase of £105 million compared to the prior period. Underlying profit before tax of £204 million compared to the underlying loss before tax of £83 million last year.
Commenting in the accounts, Alastair Cochran Chief Financial Officer at the time, said financial performance improved in 2023/24 with growth in revenue, profits and operating cash flow largely reflecting inflation-linked tariff increases, operating cost discipline and a reduction in net financing costs.
During financial year 2023 – 24 the Board approved dividends to Thames Water Utilities Holdings Ltd totalling £195.8 million (31 March 2023: £45 million). Two interim dividends totalling £37.5 million were declared on 26 October 2023, enabling Kemble Water Finance Ltd and its financing subsidiary to service external debt obligations through to 31 January 2024.
Two further interim dividends totalling £158.3 million were declared on 27 March 2024, enabling Kemble Water Eurobond plc and Thames Water Ltd to settle amounts owing to the company for group relief surrendered, and Kemble Water Eurobond plc to make pension contribution payments to the Thames Water Pension Scheme and Thames Water Mirror Image Pension Scheme defined benefit schemes on behalf of the Company.
In the first week of April 2024 Thames Water's parent company Kemble Water Finance defaulted on its debt to creditors after failing to make an interest payment which was due. According to a report by Bloomberg, the failure to make the interest payment has resulted in the holding company defaulting on around £1.4 billion of debt, triggering cross-default across all of the holding company’s debt. In addition, Thames Water (Kemble) Finance also sent a formal notice of default to the holders of £400 million pounds bonds due 2026.
In December 2024 Ofwat proposed a £18.2 million penalty for Thames Water after finding water company broke dividend payment rules – last month the regulator confirmed that the water company would be required to pay the penalty.
The 2023/24 financial year was the sixth year PwC has been Thames Water’s external auditor.
Commenting in their report on the audit of the financial statements, PwC said:
“In our opinion, Thames Water Utilities Ltd’s Group financial statements and company financial statements give a true and fair view of the state of the Group’s and of the company’s affairs as at 31 March 2024 and of the Group’s profit, the company’s loss and the Group’s and company’s cash flows for the year then ended.”
The report in the FT says Thames Water’s senior creditor group has been “unaware of the accounting problem, according to two people familiar with the matter.”