More on Northumbrian Water
Northumbrian Water: 2005/6 results
Northumbrian Water’s revenue and profit rise was the result of the price increases allowed by Ofwat. There will be more benefits from the price increase. These will be offset by higher capex requirements (the reason the price rises were allowed) and depreciation charges, in the long run they do mean a strong increase in cash flow.
Although cashflows were negative this year, and are likely to remain so in the short term, the company is currently in a period of heavy capital expenditure and cash flows should improve after about 2010.
At 242p Northumbrian Water is trading on a prospective PE of 11× with a 4.4% yield. With the full benefits of the price rises not yet apparent, it has a slightly better outlook than some in the sector and is as good a buy as any utility.
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