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AWG: H1 results
Water company AWG reported strong results for the half year to September 2005. Operating profit rose 28.8% to £192.1m. Both of AWG’s business, Anglian Water and support services group Morrison have performed well. Anglian Water serves about 6m customers in the east of England and Hartlepool. Morrison provides a range of infrastructure-related support services
Like other companies in the sector Anglian Water has benefited from price revisions, increased demand due to dry summer weather as well as improved operational efficiencies. Turnover at Anglian Water increased to £434.8m (2004: £396m) and operating profits increased to £187.8m (2004: £157.5m). Operating costs increased by £7m to £163.9m due to general cost pressures as well as higher energy costs, partly offset by increased efficiencies.
The regulator imposes minimum levels of efficiency improvements and capital investment when agreeing to price revisions, hence the industrywide trend to greater efficiencies. The company says that despite “significant efficiency challenge in the Regulator’s final determination” AWG’s efficiency programme has made good progress, and will be within the determination for the current financial year.
Morrison benefited from higher volumes on existing contracts as well as a number of new contracts won in the first half. Morrison turnover increased to £435.5m (2004: £418.6m) and operating profits rose to £14.5m (2004: £1.3m) The strongest growth was in the support services business where profits increased from £3.5m in 2004 to £9.2m due to higher volumes on existing contracts and new contracts won. Project Investments (which manages PFI contracts) profits rose by £5.9m to £6.9m boosted by the disposal of the Edinburgh Royal Infirmary PFI concession. Morrison’s orderbook stands at £2.6bn, comparable to last year.
The share trades at 1025.5p, on a prospective PE (2005 earnings) of 20x, at the upper end of the sector range with a yield of 4.9%.
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