AWG goes back to basics after getting soaked in other markets

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The Independent Online

Jonson Cox, the new chief executive of AWG, will announce a back-to-basics strategy on Wednesday in which the utility will return to its roots as a water company.

The announcement will bring the Anglian water company full circle, after its botched attempt to expand into the management of utility infrastructure for other companies.

Under former chief executive Chris Mellor, AWG spent £128m on advisers' fees refinancing the business, a process which saw its regulated water operation ringfenced from its infrastructure management arm.

But after launching a strategic review immediately after joining from Railtrack in November, Mr Cox has now concluded that AWG should focus on being a regulated water company.

Mr Cox was a director of Yorkshire Water before moving to Railtrack, where he was chief opearting officer. He will stop short of announcing a sale of the infrastructure management arm. But he will tell the City that its growth will be severely curtailed.

AWG hopes that this will draw a line under a difficult period in its history. Under Mr Mellor the company went on a huge acquisition programme, expanding internationally and moving into areas unrelated to the water industry, such as vehicle leasing. However, many of these businesses proved a drain on AWG. It was forced to announce a string of exceptional costs as problems started to emerge.

Arguably the biggest problem was the £263m purchase of Morrison Construction in 2000. Shortly after the deal was completed, AWG launched a £130m lawsuit against Sir Fraser Morrison which alleged fraudulent misrepresentation in the run-up to the deal. AWG has already spent more than £1m in legal fees on the case.

City investment banks are predicting that AWG will post a profit before tax of between £72m and £82m, down on last year's figure of £106m.