More on AWG
AWG : Trading statement
AWG in a trading statement announced today said that trading at its core regulated business, Anglian Water traded in line with management expectations. The regulated business generates almost all of AWG’s operating profits.
AWG has started its cost cutting programme, and will make a provision of £11m in the FY2005 results as the company reduces the number of employees by 300. This is necessary for AWG to reach the efficiency targets set by Ofwat, the water regulator.
Ofwat, sets price limits on a five yearly basis. The recalculation of the business plan submitted by AWG to Ofwat, assumes a £4 per property savings from future efficiency improvements over the five years. However the regulator expects a £22 per property efficiency savings in its final determination, which was accepted by the company. Efficiency savings are passed on to the customers by reducing the increase in bills by the expected amount; hence AWG needs to increase its efficiency to remain profitable.
Anglian will increase bills on average by 2.4% + inflation per annum over the next five years.
The infrastructure management business (Morrison) is expected to have an order book of £2.7bn, the bulk of it (85%) relates to longterm framework contracts.
AWG’s share trades at a prospective PE of 17.2× (823p), the highest for the sector. The 6.0% yield is at the higher end of the range for the sector.
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