Thames Water Utilities Limited Annual Financial Report (4397R)

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RNS Number : 4397R

Thames Water Utilities Limited

06 July 2022

Thames Water Utilities Limited Annual Results

Results for the year to March 2022

Promising early signs of progress in the first year of our turnaround

-- Laid foundations to deliver a turnaround in performance for the benefit of customers, communities and the environment - new Executive team, operating model and programme to reconnect with our values

-- Improved service for customers with significant reduction in complaints and GBP46 million of support for customers in vulnerable circumstances

   --      Delivered improvements in key operational performance metrics, including leakage and supply interruptions, with 60%(1) of our annual performance commitments met this year 

-- Significant increase in capital expenditure, with a record GBP1.3 billion invested to increase asset resilience

-- EBITDA unchanged despite challenging inflationary conditions, driven by growth in allowed tariffs and a partial recovery of non-household consumption

-- Higher reported losses reflecting increases in deferred tax and non-cash losses on financial instruments

-- Revised business plan unanimously approved by shareholders, including an additional GBP2 billion of expenditure, supported by new equity to accelerate delivery of our Turnaround Plan

Sarah Bentley, Chief Executive Officer, Thames Water, said:

"Just over a year into our eight-year turnaround plan, we've achieved some major milestones. We have a new Executive team in place, reconnected with our values and behaviours, and created two regional teams to become more local in the way we deliver for our customers. In addition, we've started to bring the maintenance of our water network in house and announced that we will bring all our customer-facing telephone teams onshore in the UK.

Most recently, we've announced a revised business plan, unanimously supported by shareholders, which underpins our commitment to delivering improved performance for our customers, communities and the environment. This additional investment, supported by new equity, will go towards improvements to our sewage treatment works for river health, increase resilience in our water network and drive ongoing improvements in customer service.

We know our performance isn't yet where it needs to be, and we are only at the beginning of our turnaround journey. However, there are early signs we're on the right path with complaints down significantly, a 39% reduction in supply interruptions in the last two years and a 10% reduction in leakage, meaning we've hit our target for the third year in row. We've also invested a record GBP1.3 billion in our assets this year to improve our resilience and delivered solid financial results in challenging inflationary conditions.

We still have a long way to go to turn Thames around. The success of our plan requires determination, collaboration and sustained investment, and I want to say a big thank you to colleagues, customers and stakeholders for your continued support as we build a better Thames Water. We look forward to working with you in the coming year as we progress our plan."

   --      Laid foundations for delivery of eight-year turnaround 

o New Executive team in place, with strong turnaround expertise

o Revised GBP11.5 billion business plan approved unanimously by shareholders

o Shareholders have committed GBP500 million in new equity in 2022/23 to support delivery of the revised business plan; working with shareholders on plans to provide a further GBP1.0 billion of equity funding (which will be subject to certain conditions) over the rest of the current regulatory period

o Implementing a new operational model to drive regional focus and improve performance for customers and the environment

o Launched new work management system to replace 30-year-old legacy systems

o On track to insource management of repair and maintenance of water network by end of October 2022, and for all customer-facing telephone service teams to be based in the UK by end of 2023

o Rolling out programme to reconnect colleagues with values and behaviours, and support increased engagement

o Developing improved engagement plans, recognising the need to deliver a significant change agenda in a challenging economic environment

   --      Early signs of improving trends in operational performance 

o Met over 60%(1) of our annual performance commitments this year

o Improving trends in majority of customer and operational KPIs

o 43% less household complaints(2) , but much further to go on C-MeX as we remain 17(th) out of 17 companies

o 39% reduction in supply interruptions in two years

o 10% reduction in leakage, meeting target for the third year in a row

o 20% reduction in sewage discharges

o Major flash flooding in London affected waste metrics, including sewer flooding

   --      Delivered solid underlying results in challenging inflationary conditions 
   o  Revenue up 3% to GBP2.2 billion, driven by growth in allowed tariffs and   a partial recovery in non-household consumption as UK Government Covid -19 restrictions eased 

o Invested a record GBP1.3 billion, a 22% increase as we ramp up capital delivery programme to improve resilience

o EBITDA unchanged at GBP1.1 billion, reflecting high ongoing supply chain inflation

o Reported loss after tax of GBP973 million, primarily driven by a non-cash loss on financial instruments and a one-off deferred tax charge due to the increase in corporation tax rate to 25%

o Strong growth in operating cash flow, benefitting from improved cash collection rates, and decreases in working capital and pension contributions

o No dividends paid to external shareholders for fifth year running ; GBP37 million distribution to service group debt

   --      Taking action on river health, in line with our progressive and transparent stance 

o Commitment to reduce the annual duration of sewage discharges into rivers by 50% across the Thames Valley by 2030, and by 80% in sensitive catchments

o GBP38 million invested in upgrading our sewage treatment works at Beckton

o Working with our partners on a pilot project in Oxford area results in Port Meadow becoming only the second UK river to be given designated bathing water status

o Live spills alerts from 468 permitted locations on track for the end of 2022

o Cooperating fully with both Ofwat's and the EA's ongoing investigations into sewage discharges

   --      Making a positive difference so our customers, communities and the environment can thrive 

o Increased support for customers as they deal with the lingering impacts of Covid-19, and rising energy prices and household costs - over GBP46 million of support through social tariffs and 5% of households now helped through priority services register

o Pioneering smarter water catchments plans underway for the Rivers Crane, Chess and Evenlode, and facilitating increased investment to improve river quality and biodiversity

o Self-generating 24% of our energy needs

o Progress on road to net zero by 2030 with first direct gas-to-grid project from Deephams sewage treatment works and trialling first electric vehicles

o Further progress on our journey to become a more diverse and inclusive organisation, with recognition as one of Stonewall's Top 100 Employers for LGBTQ+ commitments in the workplace and 'gold' status from the Armed Forces Covenant employer recognition scheme for our ex-military recruitment strategy

Financial performance

 
Financial performance 
Year ended                           31                                      31 March 
                                      March                                   2021 
                                      2022 
---------------------  ------------  --------  ------------  --------------  --------  --------- 
                         Underlying    BTL(1)             Total  Underlying    BTL(1)      Total 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
Revenue (GBPm)              2,092.0      84.9           2,176.9     2,032.9      73.8    2,106.7 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
Operating expenses 
 (GBPm)                   (1,843.3)     (0.1)         (1,843.4)   (1,739.5)     (0.2)  (1,739.7) 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
Operating profit 
 (GBPm)(2)                    344.4      84.8             429.2       415.2      73.6      488.8 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
EBITDA (GBPm)               1,029.4      84.8           1,114.2      1034.4      73.6    1,108.0 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
Net finance expense 
 (GBPm)                     (384.5)         -           (384.5)     (208.1)         -    (208.1) 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
Net (loss) on 
 financial 
 instruments (GBPm)         (895.5)         -           (895.5)     (522.2)         -    (522.2) 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
(Loss)/Profit before 
 tax (GBPm)                 (935.6)      84.8           (850.8)     (315.1)      73.6    (241.5) 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
(Loss)/Profit after 
 tax (GBPm)               (1,042.0)      68.7           (973.3)     (258.1)      59.6    (198.5) 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
Capital expenditure 
 including 
 intangibles 
 (GBPm)                     1,344.0         -           1,344.0     1,105.0         -    1,105.0 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
Operating cash flow 

 (GBPm)                     1,191.4       1.6           1,193.0       931.2         1      932.2 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
Net debt (statutory) 
 (GBPm)                    12,935.0         -          12,935.0    12,334.1         -   12,334.1 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
Dividends paid to 
 immediate 
 parent company 
 (GBPm)                        37.1         -              37.1        32.9         -       32.9 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
Distributions paid to             -         -                 -           -         -          - 
external shareholders 
(GBPm) 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
Gearing (%)(3)                 80.6         -                 -        83.2         -          - 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
Credit Rating                     -         -       Baa2 stable           -         -       Baa2 
                                                    /BBB+ watch                          stable/ 
                                                       negative                             BBB+ 
                                                                                        negative 
                                                                                         outlook 
---------------------  ------------  --------  ----------------  ----------  --------  --------- 
 
 

(1) 29 of our 47 annual performance commitments (5 of our performance commitments do not have a target for this year)

(2) Last year in January 2021 the CCW methodology by which complaints are reported changed to align the industry, removing the automatic categorisation of repeat contacts as complaints. Therefore, comparisons cannot be fully drawn between our full year 2020/21 and 2021/22 performance outturn.

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July 06, 2022 02:00 ET (06:00 GMT)