A fat dividend yield is the biggest buying point for investors in National Grid (NG.). Yet to deliver this the group must continue to grow its asset base. It is for this reason that, alongside a solid set of first-half figures, management also announced plans to sell the group's majority stake in the UK gas distribution business; with almost all the net proceeds earmarked for shareholders. The rationale for the sale is understandable when you consider that National Grid is on track to deliver asset growth of 4 to 5 per cent in the current year. That's well in excess of expected growth rates for the more mature distribution business - so the sale fits the bill.
Operating profit for the group's core UK electricity transmission business was £77m lower than last year at £610m. This was due to lower regulatory revenue allowances from Ofgem, as the benefits of total expenditure (totex) outperformance from the financial year ending March 2014 were shared with customers. Totex was £650m, £50m up on last year.
The US regulated business - essentially a conventional utility - boosted operating profit by £52m to £351m. Chief executive Andrew Bonfield says around 1m of its US customers are still without access to natural gas. As a result of higher spend on gas main replacement and customer growth, US regulated investment was £222m higher this year.
Broker Whitman Howard expects adjusted EPS of 62.5p for the March 2016 year-end, up from 59p in 2015.
NATIONAL GRID (NG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 911p | MARKET VALUE: | £34.1bn | |
| TOUCH: | 910.8-911.1p | 12-MONTH HIGH: | 965p | LOW: 806p |
| DIVIDEND YIELD: | 4.7% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 329p* | NET DEBT: | 200% | |
| Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 6.36 | 1.18 | 23.9 | 14.71 |
| 2015 | 6.85 | 1.35 | 27.8 | 15.00 |
| % change | +8 | +15 | +16 | +2 |
Ex-div: 26 Nov Payment: 13 Jan *Includes intangible assets of £5.9bn, or 157p a share | ||||
