RE: Garbage update23 Dec 2019 10:31
Harry
Over ambitious adoption of assets without spare cash to support
The market for the design, installation and ownership of these types of infrastructure assets has evolved significantly in the last few years. As the values being ascribed to domestic connection assets by participants in the market have increased materially, reflecting the attractions of the predictable, stable, long-term regulated cash flows associated with them, clients such as housebuilders have increasingly demanded that the value of the completed assets is reflected in the pricing structure agreed for undertaking these design and build projects. For larger domestic asset projects, this can result in all or a significant part of the effective profit margin on contracts being accounted for by the values ascribed to the completed assets, while the short-term net cash flows associated with larger domestic projects are often marginal or negative. The Group's main competitors in the gas and electrical utility connection ownership sector (being other IGT and/or IDNO licence holders) are significantly larger businesses, which are typically owned by large, private, infrastructure investment funds, and which may not face the same funding constraints that The Group does as a quoted business.