We are continuing to analyse the scope to create value by restructuring our business

AWG statement

AWG said on Wednesday it is considering spinning off its Anglian Water division on which the company was founded, following the privatisation of the water industry in 1989.

The firm changed its name from Anglian Water last month, following the takeover of the Morrison construction group.

But a split would free AWG from a water sector where, thanks to price caps imposed by regulator Ofwat, profits are harder to achieve.

'Restructuring to create value'

Operating profit at the East Anglia-based water division, which serves 5.8 million people, fell by almost one quarter in the six months to the end of September, the company said in a results statement on Wednesday.

"We are continuing to analyse the scope to create value by restructuring our business," the report said.

AWG chairman Robin Gourlay said: "We have long realised that, following a significant reduction to UK water customers' bills, we would need to increase our income from non-regulated business."

Fight for contracts

Profits in the building and services division, which is competing for public sector contracts in sectors including education, health and roads, rose �21m to �92.7m over the six months, compared with the same period last year.

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AWG has been named preferred bidder for a �50m project to build homes for military personnel in the West Country, and for a �12m Railtrack property programme.

The firm is also, as part of the Linc consortium, bidding for work to upgrade and maintain three London tube lines, under 30-year contracts tendered under the controversial Underground PPP programme.

Linc, which is bidding against a consortium headed by DaimlerChrysler's Adtranz division, "remains confident that it is well-placed to win [the] contracts", Wednesday's statement said.

Low leakage

The water business, which claims the lowest leakage rate of any supplier in the UK, has expanded into Chile, Ireland and Thailand.

The firm reported overall pre-tax profits of �73m, in line with forecasts, but down from �114.6m a year earlier.

AWG shares stood 15p higher at 622p in mid-afternoon trading in London.