Focus

Companies which change name usually claim that a corporate makeover is needed because the original title no longer reflects its activities.

There is a little of that behind Anglian Water's decision, announced yesterday, to become AWG later this year.

Chris Mellor, Anglian's managing director, believes the industry is on the brink of massive change which will see companies extending their operations into new areas at home and abroad.

But Anglian's name change also reflects its determination to claw back £160m of advance corporation tax payments.

Most of the big water companies have paid huge amounts of ACT because of their generous dividends since privatisation in 1989. ACT was usually recovered against later profit, but the rules have changed and further ACT payments, known as shadow ACT, will not be recoverable.

To avoid adding to its £160m of outstanding ACT, Anglian has decided to issue shareholders with redeemable shares rather than dividends.

But under its current corporate structure it may not issue sufficient redeemable shares because its reserves are too small. So it has decided to create a new holding company - to be named AWG - as the process will create a big merger reserve based upon the market value of Anglian.

So, for about £3m in fees, Anglian will soon be able to issue redeemable shares instead of dividends for the five years needed to recover all of the outstanding ACT.

Anglian, which froze its water prices last year, yesterday reported pre-tax profits of £204m for the year to March 31, against £227m the previous year. Shareholders are to get a final payment of 30.2p a share through the issue of redeemable shares, making a total of 43p for the year.

Mr Mellor described the introduction of competition as "a bit of a mess". The government needed to set a proper timetable for competition in water as it had in gas and electricity.