Gs hot Task guys everybody jd15 Nov 2017 15:11
NG
The timing of these results skewed National Grid�s (NG.) reported first-half figures. Its transmission businesses � which bills its supply customers in advance based on assumptions on usage and price � essentially under-recovered revenue during the period. However, this will level out over time. Strip this effect out, and adjusted operating profit was up 4 per cent year on year to �1.4bn.
NG.:LSE
National Grid PLC
1mth
Today change
0.33%
Price (GBP)
886.40
Excluding timing issues, UK electricity transmission adjusted operating profit dipped �70m due to lower base allowances � the amount it can collect from its users. With much of the business�s major projects completed, capital investment also dropped 12 per cent to �515m. Management expects it to achieve its regulatory output targets, at a cost below its total expenditure allowance.
By contrast, capital investment by the UK gas transmission business increased by �41m to �157m. That was driven by National Grid's work replacing a pipeline under the Humber estuary. Increased spending means management expects to achieve its incentive targets rather than outperforming them, but reckons upgrading the assets will boost returns in future.
In the US regulated division, its rate filing programme � which updates the rates charged to clients according to inflationary and cost fluctuations � continued to pay off. It filed a rate case for its Niagara Mohawk Electric and Gas business, representing 30 per cent of its US rate base, which will boost revenue once agreed.
Analysts at RBC Capital expect adjusted pre-tax profits of �2.6bn during the 12 months to the end of March, giving EPS of 59.4p (from �3.6bn and 73p in 2017).
NATIONAL GRID (NG.)
ORD PRICE: 911.8p MARKET VALUE: �30.9bn
TOUCH: 911.7-912p 12-MONTH HIGH: 1,097p LOW: 892p
DIVIDEND YIELD: 4.9% PE RATIO: 20
NET ASSET VALUE: 497p* NET DEBT: �23.1bn
Half-year to 30 Sept Turnover (�bn) Pre-tax profit (�m) Earnings per share (p) Dividend per share (p)
2016 (restated) 6.28 965 22.1 15.17
2017 6.68 847 19.5 15.49
% change +6 -12 -12 +2
Ex-div: 23 Nov
Payment: 10 Jan
*Includes intangible assets of �6.6bn, or 194p a share
IC View
The shares are flat on our buy tip (911p, 10 Dec 2015), but it�s all about income when it comes to National Grid. Investing in its asset base should ensure it can deliver its targeted annual return of 7 per cent, which is needed to continue its generous dividend policy. Buy.
Last IC vView: Buy, 1,052.5p, 22 May 2017
Sign In
Follow the stocks
