The ailing utilities firm Thames Water has said it is taking “immediate and radical” action to turn around the business, days after it emerged its auditors had warned it could run out of money by April.
The debt-laden water supplier said it was working on a three-year turnaround to overhaul its environmental, operational and financial performance, as profits more than halved to £246m in the six months to 30 September, largely due to changing valuations of its assets.
The company, which supplies 16 million customers, said its revenues rose 11% to £1.2bn over the period.
Thames Water’s three-year plan focuses on six areas: health and safety, customer complaints, water quality, leakage, supply interruptions and pollution.
The company’s interim co-Cchief executives, Cathryn Ross and Alastair Cochran, said in a statement that, while it was in line with industry averages in “many areas” that “in some other areas our performance needs to improve, including some areas of operational and environmental performance that matter most to our customers and communities. Our financial performance also needs to improve. It is clear that immediate and radical action is required.”
They added: “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.”
But Thames admitted its record on releasing pollution into Britain’s waterways had “deteriorated”.
Thames said that the “overall performance [on pollution] deteriorated in the first half, with category 1-3 pollutions increasing year-on-year from 217 to 257”. The company said it had managed to reduce blockages, a big factor leading to sewage releases, by 5%.
Thames’ auditors, PricewaterhouseCoopers, have said there was “material uncertainty” about whether the main company behind the water supplier can continue as a going concern without a cash injection by shareholders in accounts for Thames’ ultimate parent company, Kemble Water Holdings, for 2022-23, signed off in July and filed at Companies House last week.
Thames’ shareholders put in £500m in 2023, and have agreed to invest a further £750 “across AMP7” – the water industry asset management plan period running from 2020 to 2025. It has indicated that a further £2.5bn would be needed to cover the five years to 2030.
On Tuesday, the water firm said receiving the £750m was contingent on certain conditions, including agreeing a business plan with regulators that “underpins a more focused turnaround that delivers targeted performance improvements for customers, the environment and other stakeholders over the next three years”.
The finances of Britain’s biggest water supplier have been the subject of scrutiny since it emerged that the government was drawing up contingency plans for a temporary nationalisation during the summer amid fears over its huge debt pile. It emerged shortly after the abrupt resignation of its former chief executive, Sarah Bentley.
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Thames, which has a £14bn debt pile, said it had paid a dividend that ultimately reached Kemble, which will use it to service group debt obligations. The group did not pay a dividend to external shareholders.
Thames said it had total liquidity of £3.5bn, as well as further funding resources, and added that its shareholders supported its investment plans.
The company said it had reduced a backlog of customer complaints by 49%, but work to clear that backlog had “increased volume of second stage complaints, which has contributed to the overall inflow increasing by 13% year on year to 38,872”.
Concerns over Thames’s debts come against the backdrop of a water industry in the crosshairs of MPs and the public over sewage dumping, leaking pipes, executive bonuses and under-investment in UK infrastructure.
In October, Thames said its customers would face a rise in bills from £436 to £611 a year in the five years from 2025. The company plans to make £18.7bn of investment over that period, including £4.7bn to improve service quality.
Thames said the number of leaks in its network had fallen by 6% in the first half of its financial year.
