Income investors will be pleased to hear that National Grid (NG.) increased its final dividend for the year to 31 March, sticking to its policy of growing the annual payout by at least retail price index inflation. This was despite underlying operating profit coming in flat at £3.45bn, falling short of analyst consensus of £3.58bn (as compiled by FactSet). Earnings were weighed down by an additional £117m provision for customer bad debts in the US, reflecting the impact of Covid-19.
The pandemic is expected to produce a £400m hit to underlying operating profit this year thanks to further US bad debts, higher costs and the deferral of a rate increase. Lower customer revenue collections across the pond could also hamper cash flow by up to £1bn. The regulatory framework means bad debts and revenue shortfalls can be recovered through future rate plans. So despite near-term pressures, National Grid anticipates “no material economic impact” in the long-term.
Capital investment jumped by almost a fifth at constant currencies last year, to £5.4bn, driven by higher spending on its regulated US assets. This helped push net debt (including lease liabilities) up 8 per cent to £28.6bn, equivalent to 63 per cent of its regulatory capital value. With the Covid-19 impact on cash flow, net debt is set to rise by £3bn this year.
| NATIONAL GRID (NG.) | ||||
| ORD PRICE: | 949p | MARKET VALUE: | £ 33.2bn | |
| TOUCH: | 949-950p | 12-MONTH HIGH: | 1,074p | LOW: 789p |
| DIVIDEND YIELD: | 5.1% | PE RATIO: | 26 | |
| NET ASSET VALUE: | 560p | NET DEBT: | £28.6bn** | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 13.2 | 2.33 | 50.4 | 43.34 |
| 2017 | 15.0 | 2.18 | 48.1 | 44.27 |
| 2018 | 15.3 | 2.66 | 103 | 45.93 |
| 2019 | 14.9 | 1.84 | 44.3 | 47.34 |
| 2020 | 14.5 | 1.75 | 36.8 | 48.57 |
| % change | -2 | -5 | -17 | +3 |
| Ex-div: | 02 Jul | |||
| Payment: | 19 Aug | |||
| *Includes £7.5bn in intangible assets or 215p a share, **Includes £735m in lease liabilities | ||||
