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Anglian Water blames profit drop on tighter price controls

Anglian Water has blamed a 24.8 per cent fall in operating profit on the effect of the regulatory price reduction and increased operating costs.

The water company reported an underlying operating profit of £340.4 million for the year ended 31 March 2016, down from £452.6 million the previous year.

Revenue for the year was £1,185.4 million – down £58.9 million on last year – primarily reflecting the reduction in customer bills which came into effect on 1 April 2015, in line with the regulatory price setting review. This was partially offset by customer growth in the region.

Operating costs for the year increased by £36.7 million (7 per cent) to £560.6 million, compared with £523.9 million in 2015.

Anglian said almost half of this increase is due to a rise in minor repair costs which used to be capitalised under the old infrastructure renewals accounting rules, and has consequently increased volatility in operating costs.

The bad debt charge for the year was down 3.6 per cent on the previous year at £31.9 million (2015: £33.1 million), which the group put down to the impact of the tariff reduction in the year, and improved management of customer credit.

Over the five years of AMP6, Anglian plans to invest more than £2.1 billion through its investment programme.

It will also invest more than £800 million to “support protection of customer supply”, it said.

The company said its business retail arm – Anglian Water Business (AWB) – is “advanced in its preparation” for the opening of the market to supply non-household customers in April 2017.

AWB moved into its own office with separate IT and telephony systems in April 2015, and is now operating independently of its wholesale operation.

Anglian Water Services is also preparing for competition and has established a wholesale service centre, which will be the single point of contact for all retailers.

Anglian chief executive Peter Simpson said: “Despite the fall in revenue that follows the bill reduction, and the significant challenges posed by the introduction of stretching outcome delivery incentives (ODIs), we have delivered a year of very strong performance.

“We have exceeded our targets in a number of key areas. All of our ODIs have met their base targets for the year, with three achieving maximum – or close to maximum – reward as a result of exceptionally strong performance against targets that really deliver for the business and for our customers.

“Performance in leakage, pollutions and interruptions to supply is particularly pleasing, with measures for all these areas at their best ever.

“In the coming year we will continue to drive efficiency across our business, recognising the importance of relative efficiency in the way the industry will be judged. Our focus will remain on maintaining and improving business performance, while continuing to influence national policy to support the case for building long-term resilience in the run up to PR19, planning for which is already underway.”

-This article first appeared on Utility Week.

Author: Lois Vallely,
Topic: Policy & Regulation
Tags: Anglian Water , retail , wholesale , business

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