LONDON - Thames Water is on track to spend 1 billion pounds this year on London's water system, about a quarter of it on replacing leaky Victorian-era pipes, after it increased first-half profit by 50 percent.

Thames reported pretax profit of 199.7 million pounds for the six months to September 30 due to cost cutting, and said it was already ahead of its full-year leakage target.

"The legacy of high operating costs and inefficient working practices has now been put behind us," said Chief Executive David Owens who took over last December after Thames was bought by Australia's Macquarie Bank.

"Capital investment is up and on track to be at around 1 billion pounds, the largest annual investment ever undertaken by a water company," he added.

The highly profitable firm caused an uproar last year when it lost 894 million litres of water a day, enough to fill 344 Olympic-sized swimming pools, while imposing a hosepipe ban and enjoying a 31 percent rise in annual profit.

But a new management team set about tackling leakage, cutting it to an average of 695 million litres a day over the last 12 months -- ahead of its end-year target of 755 million litres a day.

The group laid 266 kilometres of new water mains during the six months and is on track to beat the full-year target of 362 kilometres.