Thames Water Utilities Finance PLC Annual Financial Report (4768F)

TIDMBA18

RNS Number : 4768F

Thames Water Utilities Finance PLC

10 July 2023

Thames Water Utilities Limited

Full Year Results for the twelve months ended 31 March 2023

Thames Water Utilities Finance Plc announces that Thames Water Utilities Limited has announced its Full Year Results for the twelve months ended 31 March 2023.

Record investment and new operational model supporting the turnaround of Thames Water

   --      Record GBP1.8 billion investment in our assets, a 60% increase in two years 
   --      Restructured the business to a regional operating model 
   --      Insourced repair and maintenance of water network and on shored customer-facing care teams 

Operational performance impacted by extreme weather and ageing assets

   --      55% of annual performance commitments met 
   --      Complaints fell by 28%, the second consecutive significant year-on-year reduction 

-- Improvements in several key performance commitments including a reduction in sewage discharges, internal sewer flooding, and sewer blockages

   --      Record summer drought had significant impact on leakage and pollutions performance 

Increased support for customers and focus on environmental transparency

-- Supported over 300,000 customers, increasing social tariff support to GBP50 million in the year

-- Taking leadership stance on river health and transparency - the first company to publish a live map of sewage discharges

Financial performance impacted by high inflation and investment in leakage

   --      Revenue increased 4% to GBP2.3 billion largely reflecting tariff growth 
   --      EBITDA down 3% to GBP1.1 billion, reflecting higher operating costs 
   --      Gearing fell 3.2 ppts to 77.4%, its lowest level in 10 years 

Strong liquidity and ongoing shareholder support underpin a transition to a more focused turnaround plan

   --      Strong liquidity position of GBP4.4 billion as at 31 March 2023 
   --      An initial GBP500 million of shareholder funding was drawn on 30 March 2023 

-- Shareholders have agreed to provide a further GBP750 million of equity funding in AMP7, subject to satisfaction of certain conditions (1)

-- Shareholders have also acknowledged that delivery of the Turnaround Plan is likely to require the provision of further equity support in AMP8 (2025-30), significantly in excess of their current AMP7 commitment and indicatively is expected to be in the region of GBP2.5 billion (2)

Cathryn Ross and Alastair Cochran, Interim Co-CEOs of Thames Water said:

"It was an extremely challenging year for Thames Water and the water industry. Our network came under unprecedented pressure from record temperatures, a drought and a freeze / thaw event. At the same time, economic factors also impacted our financial results with high inflation driven by a surge in energy and chemical prices. In short, our performance was not as we - or our customers - wanted it to be.

"Despite this, we are in a robust financial position. We had GBP4.4bn liquidity as at 31 March 2023 and are extremely fortunate to have such supportive shareholders. Their commitment to delivering Thames' turnaround and life's essential service is reflected in the largest equity support package ever seen in the UK water sector, whilst taking no dividends out.

"Given our performance, we launched a review of our turnaround two and a half months ago to identify what needs to change to deliver better performance, quicker. As a result, we are transitioning to a more focused Turnaround Plan - this targeted approach focuses expenditure on a smaller number of initiatives that will deliver substantial and sustainable improvements in key performance metrics over the next three years.

"This plan builds on the foundations that have been put in place over the last two years and progress made this year. We have brought customer-facing teams back into our region and insourced the repair and maintenance of our water network. We're fixing more leaks and customer complaints have continued to fall significantly. We have also increased investment in our networks and assets to record levels as we undertake a detailed review of our ageing Victorian asset infrastructure to determine what needs to be done to improve operational resilience and performance over the long-term.

"Our balance sheet remains robust and, while change will not happen overnight, we are confident we have the right strategy, team and support in place to deliver for our customers, communities and the environment in London and the Thames Valley."

Financial performance

 
Year ended                          31 March 2023                  31 March 2022 
--------------------------  -----------------------------  ------------------------------ 
GBPm                        Underlying  BTL(3)      Total  Underlying  BTL(3)       Total 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
Revenue                        2,180.7    84.5    2,265.2     2,092.0    84.9     2,176.9 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
Operating expenses           (2,016.7)   (0.1)  (2,016.8)  (1, 843.3)  (0. 1)  (1, 843.4) 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
Operating profit                 271.6    84.4      356.0       344.4    84.8       429.2 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
EBITDA                         1,001.8    84.4    1,086.2     1,039.4    84.8     1,124.2 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
Net finance expense            (476.5)       -    (476.5)     (384.5)       -     (384.5) 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
Net gain / (loss) 
 on financial instruments        122.3       -      122.3    ( 895.5)       -    ( 895.5) 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
(Loss)/Profit before 
 tax                            (82.6)    84.4        1.8    ( 935.6)    84.8    ( 850.8) 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
Profit / (Loss) after 
 tax                           (132.3)   102.2     (30.1)  (1 ,042.0)    68.7    ( 973.3) 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
Capital expenditure 
 including intangibles         1,769.7       -    1,769.7    1, 344.0       -    1, 344.0 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
Operating cash flow            1,114.4     1.8    1,116.2     1,191.4    1 .6     1,193.0 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
Net debt (statutory)          13,958.6       -   13,958.6   12, 935.0       -   12, 935.0 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
Dividends paid to 
 immediate parent 
 company                          45.2       -       45.2        37.1       -        37.1 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
Distributions paid                   -       -          -           -       -           - 
 to external shareholders 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
Senior gearing (4)               77.4%       -          -       80.6%       -           - 
--------------------------  ----------  ------  ---------  ----------  ------  ---------- 
Credit Rating (5)             Baa2 stable / BBB stable        Baa2 stable / BBB+ watch 
                                                                      negative 
--------------------------  -----------------------------  ------------------------------ 
 

Notes

1. This further funding is subject to satisfaction of certain conditions, including the preparation and production of a business plan that underpins a more focused turnaround that delivers targeted performance improvements for customers, the environment and other stakeholders over the next three years and is supported by appropriate regulatory arrangements

2. The nature and level of such medium-term support will depend on the finalisation of the business plan

3. Refer to pages 124 to 125 of the Thames Water Annual Report 2022/23 for information about the Bazalgette Tunnel Limited ("BTL") arrangement

   4.    Ratio of Senior covenant net debt to Regulatory Capital Value ("RCV") 

5. Representing the consolidated Corporate Family Rating assigned by Moody's / S&P Class A debt of the securitisation group; S&P placed its ratings on negative CreditWatch on 30 June 2023

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Hannah Law - Media Relations Manager

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Sarah Long - Head of Media Relations

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For investor enquiries please contact

Sarah Davies - Head of Investor Relations

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