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Thames Water warns overhaul will ‘take time’ as debts mount and profits slump

Thames Water said revenues rose to £1.3 billion but it spent a record £1 billion on improving its network (Dominic Lipinski/PA)
Thames Water said revenues rose to £1.3 billion but it spent a record £1 billion on improving its network (Dominic Lipinski/PA)

Troubled utility giant Thames Water has warned that its turnaround will “take time” as it revealed profits more than halving and its debt pile mounting further.

The UK’s biggest water supplier reported a 54% drop in pre-tax profits to £246.4 million in the six months to September 30.

Revenues rose 12% to £1.3 billion but it spent a record £1 billion on improving its network.

The results also revealed its debt pile swelled by 7% to £14.7 billion.

Interim bosses said “immediate and radical action” is needed to improve its environmental and financial performance.

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.”

The results come just days after it emerged that auditors of Thames Water’s parent company Kemble Water Holdings have warned it could run out of money by next April if shareholders do not pump in more cash.

PricewaterhouseCoopers (PwC) warned in accounts published last week at Companies House that there is a “material uncertainty” over the future of Kemble – the main company behind Thames Water – amid worries there are no plans in place to refinance a £190 million loan at one of its subsidiary companies.

Thames Water shareholders agreed in the summer to inject £750 million of new funding to bolster the supplier’s finances and stave off the threat of nationalisation.

Last year the company had asked investors for £1 billion.

A Thames Water Utilities spokesman said: “We are in a robust financial position and are extremely fortunate to have such supportive shareholders.”

The firm said the funding package agreed in the summer “is subject to satisfaction of certain conditions, including the preparation 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”.

Shareholders have also “acknowledged” the need for around another £2.5 billion in equity investment needed in future regulatory periods, the group added.

The water supplier’s former boss, Sarah Bentley, stepped down abruptly in June amid concerns over the firm’s financial security.

It was revealed in June that the Government was drawing up contingency plans for an emergency nationalisation should Thames Water collapse as concerns grew that it would buckle under the weight of its massive debts.

The company – whose ownership structure has been revealed to comprise a highly complicated web of firms behind the supplier – has been saddled with debts since privatisation and now faces higher interest on this debt as some of it is linked to the rate of inflation.

The group is also set for a possible investigation into whether it misled MPs earlier this year over the state of its finances and support from investors.