The directors present the strategic report for the period ended 30 September 2024.
This entity forms part of the Kemble Water Holdings Limited Group of companies.
The directors are pleased with the performance of the company with an operating profit of £22,209 being generated in the period. They expect the business to continue generating operating profits in the future and to continue generating cash going forward.
The Directors have determined that the result before tax and the net assets or liabilities are the most appropriate key performance indicators for an understanding of the development, performance, and position of the Company. For the 18 months ended 30 September 2024 the Company made a loss before income tax of £13,501,658 (12 months ended 31 March 2023: Profit before tax £443,432), due to the impairment of an intercompany loan receivable.
As at 30 September 2024, the Company had net assets of £840,323 (31 March 2023: net assets £14,345,425). The decrease relates to the impairment of an intercompany loan receivable.
The Company's operations specifically expose it to a variety of financial risks as follows:
(i) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's loan balance to Kemble Water Finance Limited, against which a 100% provision has been recorded with the contractual finance income accrued in the period from interest on outstanding debt not being recognised as amounts are not expected to be recoverable and no interest received. Credit control polices and procedures are in place to minimise the risk of any unprovided bad debt arising from third parties including, where appropriate, a review of the credit ratings of the counterparty entity and, accordingly, the receivable has been provided against to the extent to which the carrying value is deemed recoverable.
(ii) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due and arises principally from the amounts owed to creditors. The Company performs regular cash flow analysis and has sufficient liquidity to mitigate this risk.
The Group's treasury operations are managed centrally by a specialist team, which operates with the delegated authority of the Directors and are provided to the Company under an intragroup services agreements with a company in the group, Thames Water Utilities Limited. The operation of the treasury function is governed by specific policies and procedures that set out specific guidelines for the management of interest rate risk, foreign exchange risk and the use of financial instruments. Treasury policies and procedures are incorporated within the financial control procedures of the Group.
(iii) Reliance on one main customer
The Company's revenue source is generated from a single customer, Watersite Limited. Watersite provide the Company with two revenue streams: income from an annual license fee and income from the income rights sales. There is a signed agreement with Watersite which runs for 50 years and given the length of this agreement and the credit control policies and procedures in place the Directors are satisfied that this does not present a significant risk to the future income of the Company.
On behalf of the board
The directors present their annual report and financial statements for the period ended 30 September 2024.
The results for the period are set out on page 8.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
Sumer Auditco Limited were appointed as auditor to the company and is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.
In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Thames Investments Limited ("TWIL") Directors have adopted the going concern basis in preparing these financial statements having given due consideration to the financial position of the Company and the wider Group.
Kemble Water Finance Limited ("KWF"), an indirect 100% parent of TWIL, is in default of its secured financing facilities. As at the date of this report there is a material uncertainty over the financial position of KWF as its secured creditors may enforce their right to the pledge over shares in Thames Water Limited ("TWL"), the direct parent of TWIL. There is, however, an informal standstill in place at present. The Directors have considered the impact on TWIL of any enforcement action being taken against KWF and determined that this may result in a possible change in ownership of the Company as a result of debt holders enforcing their pledge over the shares in TWL. In the event of a change of ownership, the Directors are unaware of the future intentions of the new owners. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern.
As of the date of signing these accounts TWIL has £1,030k of available cash. The Directors have considered the forecast cash flow in this context for a period of 12 months after the approval of these accounts and despite the material uncertainty, are satisfied that the company holds enough cash to meet its obligations as they fall due.
For these reasons, the TWIL Directors have a reasonable expectation that TWIL will be able to meet its liabilities as they fall due for a period of at least 12 months from the date of these financial statements and have therefore concluded that the financial statements should be prepared on a going concern basis.
The Company expects to continue to lease non-specialised operational properties to third parties and other companies within the Group.
We have audited the financial statements of Thames Water Investments Limited (the 'company') for the period ended 30 September 2024 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
Material uncertainty relating to going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in the accounting policies of the financial statements concerning the company's ability to continue as a going concern.
We note that Kemble Water Finance Limited ("KWF"), an indirect 100% parent of the company, is in default of its secured financing facilities. As at the date of this report there is a material uncertainty over the financial position of KWF as its secured creditors may enforce their right to the pledge over shares in Thames Water Limited ("TWL"), the direct parent of the company. This may result in a change of ownership of the company, and the directors are unaware of the future intentions of any new owners.
These conditions, along with the other matters explained in the accounting policies to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern.
The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern. In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial period for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, and through discussions with the directors (as required by auditing standards) and discussed with the directors the policies and procedures regarding compliance with laws and regulations. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation. We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
Secondly, the company is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: Companies Act 2006, FRS102, Health and Safety at Work Act and Employment Law.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and inspection of regulatory and legal correspondence, if any. Through these procedures we did not become aware of any actual or suspected non-compliance.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
We design procedures in line with our responsibilities, outlined below to detect material misstatement due to fraud:
Matters are discussed amongst the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud
Identifying and assessing the design and effectiveness of controls that management have in place to prevent and detect fraud
Detecting and responding to the risks of fraud following discussions with management and enquiring as to whether management have knowledge of any actual, suspected or alleged fraud;
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Other matters which we are required to address
The financial statements of Thames Water Investments Limited for the year ended 31 March 2023 were not required to be audited under UK GAAP. As such, the comparative figures in the financial statements for the period ended 30 September 2024 are unaudited.
Use of our report
This report is made solely to the company's member in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's member those matters we are required to state to the member in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's member, for our audit work, for this report, or for the opinions we have formed.
The income statement has been prepared on the basis that all operations are continuing operations.
Thames Water Investments Limited is a private company limited by shares incorporated in England and Wales. The registered office is Clearwater Court, Vastern Road, Reading, Berkshire, RG1 8DB.
The Company has changed its accounting reference date from 31 March 2024 to 30 September 2024. Accordingly, the current financial statements are prepared for an 18 month period from 1 April 2023 to 30 September 2024. The comparative figures are for the 12 months ended 31 March 2023. As a result the comparative amounts presented within these financial statements (including the related notes) are not entirely comparable.
At the commencement of the financial period, on 1 April 2023, the accounting standards adopted by the Company were transitioned from FRS 101 ‘Reduced Disclosure Framework’ to FRS 102 ‘The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland’. This change was enacted because as at signing of this report the Kemble Water Holdings Limited (“KWH”) had not filed consolidated financial statements and therefore the Company cannot benefit from FRS101 disclosure exemptions. There were no changes to accounting policies used previously and there has respectively been no impact on equity and profit or loss; in addition, the prior year figures have not been restated as there is consistency between prior and current period disclosure.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
Interest Income
Interest income is recognised using the effective interest method.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The company makes an estimate of the recoverable value of trade and other receivables, including intercompany loan receivables. When assessing the impairment of trade and other receivables, management considers factors such as their net asset position and risk affected forecasts of future cash flows of the underlying investment. See note 7 for the net carrying value of the receivables and, where applicable, any associated impairment provision. In the current year the impairment provision totaled £14,839,071 (2023:£ NIL).
During the period, a group balance that was included in the year ended 31 March 2023 financial statements as a creditor greater than one year was repaid on the 29 September 2023. A prior year adjustment has been processed to ensure creditors for 2023 is presented on a comparable basis.
As a result of the prior year adjustment, creditors falling due within one year have increased by £922,000 and creditors falling due after more than one year have decreased by £922,000. There has been no change to the previously reported profit or net assets position as at 31 March 2023.
The average monthly number of persons (including directors) employed by the company during the period was:
As at the reporting date the company was owed £20,989,533 (2023: £19,674,329) from a fellow group company Kemble Water Finance Limited £6,150,462 of this balance has been provided for in previous periods. As at the reporting period, the remaining balance including the accrued interest is fully provided for as management do not expect the amounts to be recoverable.
The loan and interest accrued for the balance owed by group companies was has been fully provided in the current period. Please refer to note 6.
The following are the major deferred tax liabilities and assets recognised by the company:
The deferred tax asset set out above relates to accelerated capital allowances that are expected to mature over the associated fixed assets useful economic life.
As at 30 September 2024, the Company had no guarantee arrangements in place. In the period up to 9 July 2024, the company was in a pooling group as part of a net overdraft facility available across the parent company and certain other subsidiaries, where any overdraft existing in a company was netted off against the positive cash balances in other companies within the net overdraft facility, but this arrangement ceased on 9 July 2024. At 30 September 2024 the Company had no capital commitments (2023: none).