Thames Water has returned to a full-year profit after hiking its customers bills by 40% last year.

The UK’s largest water company reported post-tax income of £113m for the 12 months to the end of March, swinging from a £1.51bn post-tax loss the previous year.

However, the firm’s net debt also swelled to £18.5bn from £16.8bn as it said it “continued to fund the business through… debt and internally generated cash flows”.

Chief executive Chris Weston said: “The progress we have made in turning the company around has meant we are now performing better.”

The publication of Thames Water’s results comes after the government rejected a proposed rescue deal for the business in June.

Under the terms of the deal, Thames’ lenders wanted leniency from future pollution fines in return for writing off £9.4bn of its debt pile and investing new money.

Thames Water said on Wednesday pollution incidents had fallen by 18%. It hit just over half of its performance targets.

The firm said it was below target when it came to customer complaints, which jumped by 77% in a year, with bill complaints making up over three quarters of the total.

The results also reveal how money from its customer bills is not enough to fund the massive upgrades needed to improve its aging and historically underinvested infrastructure, which means it needs to borrow more money.

It added that it has enough debt funding to keep the business going “through to Q4 2026”.

Weston told investors on a call on Wednesday its investors “want to see what the new Burnham government thinks before providing more funding”.

Labour MP Andy Burnham is expected to become Prime Minister on Monday. He has previously called for Thames Water to be nationalised.

Additional reporting by Simon Jack