National Grid (NG.) lists one of its principal risks and uncertainties as a “failure to adequately anticipate and minimise the adverse impact from disruptive forces such as technology and innovation on our business model”. That explains why the group will spend $250m (£192m) on Silicon Valley start-ups over the next two to three years under its National Grid Partners initiative. It has now fully disposed of its UK gas distribution business in its search for higher-yielding assets – but it's also looking to broaden its capabilities.
Sceptics might point to the risk attached to start-up investments, but the pooled internal rate of return of US venture capital across all companies stood at 37.3 per cent in 2016, according to Cambridge Associates. National Grid’s spending on start-ups only makes up a fraction of its capital expenditure anyway. It will invest £4.3bn this year as it looks to remain near the top of its asset growth target of 5-7 per cent.
Underlying operating profits were down 6 per cent on the previous half-year to £1.29bn. Storm costs in the US contributed, although most of these will be recoverable. US tax reforms weighed on performance, although they will be economically neutral for utilities over the long run. National Grid also has had to return allowances granted to it by Ofgem for a planned gas pipelines project at Avonmouth, which was never built.
| NATIONAL GRID (NG.) | ||||
| ORD PRICE: | 848p | MARKET VALUE: | £28.8bn | |
| TOUCH: | 847.8-848.2p | 12-MONTH HIGH: | 929p | LOW: 733p |
| DIVIDEND YIELD: | 5.5% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 568p | NET DEBT: | 133% | |
| Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 6.68 | 780 | 17.7 | 15.49 |
| 2018 | 6.35 | 522 | 12.7 | 16.08 |
| % change | -5 | -33 | -28 | +4 |
| Ex-div: | 22 Nov | |||
| Payment: | 9 Jan | |||
| *Includes intangible assets of £6.85bn, or 202p a share | ||||
