Thames Water announced a 31 per cent increase in profits today but admitted it had missed its leak reduction target for a third successive year.
The company said it was still losing 894 million litres of water a day despite reducing leakage from its pipes.
The target set for it by the water regulator Ofwat was 860 million litres.
The company has faced consistent criticism for failing to fix its leakage problems, and has been forced to ask for a drought order which would affect London and some areas of Kent and Surrey.
These areas are already subject to a hosepipe ban.
Thames Water said it was disappointed to have missed the target, despite reducing leakage to its lowest level for four years.
Jeremy Pelczer, chief executive of Thames Water, said: "It is immensely frustrating that despite our strenuous efforts to reduce leakage we have missed our target. We remain committed to achieving our target over the full five-year regulatory period."
The company's also reported today that pre-tax profits were up 31 per cent to £346.5 million.
Mr Pelczer added: "In the face of a challenging year for Thames Water and the whole sector, we are pleased to deliver a good set of results."
Ofwat said it viewed the company's failure to meet its leakage targets as "unacceptable".
The regulator said: "Given its current leakage performance, we are concerned that the company may not meet future leakage targets or its security of supply commitments.
"Customers are paying the higher prices that Thames Water has been allowed to charge - an average increase of 24 per cent over 2005/10, excluding inflation - without getting all the benefits that the company has promised to deliver. This is unacceptable.
"Although the current drought is the result of below-average rainfall for two consecutive winters, we expect Thames Water to set a good example by controlling its leakage. The company's poor leakage performance is not only inefficient, it is also contributing to water shortages that have led Thames Water to impose a hosepipe ban and seek a drought order.
"Meeting its leakage targets should be a very high priority for Thames Water. We expect the company to spend as much as is necessary to remedy its leakage failure and ensure that it delivers value for money and security of supply for its customers."Reuse content