Privatised utilities have made a habit of acquiring companies in non-regulated areas to boost their growth prospects.
Severn Trent is developing a laboratory business and, through Biffa, has entered waste management. AWG, the owner of Anglian Water, has expanded into construction, buildings management and laying roads.
Centrica’s expansion policy, however, has proved the most, um, imaginative, leading it through Goldfish into consumer credit, through One.Tel into telecoms and through the AA into vehicle breakdowns.
Centrica, formed from the privatised British Gas, is equally creative in explaining the rationale behind such apparent diversity, saying the group’s rationale is to provide “essential services” in “chosen markets”. The question, of course, is how they were chosen, the answer to which seems to revolve around opportunism rather than coherence.
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Indeed, the AA has served Centrica reasonably well, enjoying a 27 per cent increase to £93 million in operating profit last year, helped by expansion into personal finance and, less so, by the start of mobile tyre fitting services.
Nonetheless, in times of upheaval in its core energy markets, Centrica could make use of the £1.5 billion the AA is reportedly worth. North America is providing occasional acquisition opportunities. Deregulation in Europe promises huge potential for energy companies. Energy companies, that is, which can protect themselves from wholesale price rises, as Centrica is attempting through snapping up power stations.
Sir Roy Gardner, the Centrica chief executive, in 1999 described the AA as offering the group an “excellent strategic fit”. By the corporate fashions of the late 1990s, perhaps, when tailoring for growth allowed companies a baggier look.
The focused chic of the mid-2000s dictates an altogether more lean appearance.
MIKE VERDIN