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Thames Water has posted faltering profits of £270 million for the last 12 months, 22 per cent less than 2005-06.

The UK water company, which has 13 million customers in London and the south-east, said its annual results reflected the "combined challenges" of last year's lack of rainfall and continued attempts to address leakages.

In a statement to the London Stock Exchange this morning Thames Water said that it was meeting leakage targets set by industry regulator Ofwat, despite losing 810 million litres per day last year.

The firm says it invested £238.9 million on tackling leakages during the last year, and had already earmarked a further £900 million to further address the problem.

"Operationally, Thames Water faced its critics during the year, but during this challenging period the company maintained supply, succeeded in meeting its leakage targets and improved customer service," commented David Owens, chief executive at Thames Water.

"The battle to restore the company's standing has only just begun, but Thames today is a stronger, more efficient and more reliable company than the one the new management team inherited in December."

Mr Owens continued: "Meeting our leakage target is an important milestone, reflecting in part the acceleration of our Victorian mains replacement programme; improvements in customer service are reflected by a nine per cent fall in complaints and targets for metering have been exceeded with more than double the anticipated numbers being installed.

"There is still much to be done however; operating efficiency requires further improvement and we are spending less than we would like on the capital investment programme, but there are real signs of progress."

Last year Thames Water was sold by German utility giant RWE to a consortium led by Australian bank Macquarie.

In response to today's claim from Thames Water, Ofwat said the company meeting its leakage targets was "good news for water consumers" but cautioned that "there is still a lot of work to be done".

"Thames Water cannot afford to be complacent. Ofwat will continue to monitor closely the company's future performance," a statement added.