National Grid Ordinary 11,17/43p (NG.)

Company overview

The Group's core operation is transmitting and distributing energy in both the UK and US. It operates an electricity transmission network of approximately 14,000 miles in length, along with a gas transportation system in the UK. The group’s US interests serve around 3.3 million customers in the region of New England and New York State.

HL Comment (15 May 2008)

National Grid is the UK electricity transmission operator which since becoming a public company back in 1990 has diversified into becoming both a gas and electricity distribution group. However, in more recent years the group’s gas interests have been scaled back, but the geographical spread of the business has been strengthened. The group’s footprint in the North American market has been considerably widened, with the relatively recent acquisition of North American energy company Keyspan for $11.7 billion.

The group’s recent full year results again saw the company making progress, with pre-tax profits up by 24pc to £1.83 billion and the full year dividend being increased by a 15pc. Progress has been led by higher profits in the gas distribution business, along with an increasing contribution coming from the company’s US business. National Grid is now the second biggest energy delivery company in the USA, when assessed on customer numbers. Looking forward, whilst the company has previously announced its intentions to concentrate on its UK and US assets, as of the full year results, the company did confess to a potential interest in transmission assets being sold by German power group E.ON AG. The German power group plans to sell its transmission assets as well as some 4,800 MW of power-generating capacity in order to end a pending European Commission anti-trust probe. Management highlighted that price is their major focus.

Acting for negative investor concerns, a move into Germany would create potential uncertainties whilst overall group valuation has become an issue for some analysts. On the positive, the company’s record over recent years has proven solid, with substantial cash being returned to investors and the company situated in a relatively defensive industry. Furthermore management remains positive on the outlook, backed by a further increase in the dividend. On balance, market consensus opinion denotes a strong hold. 

All yield figures are variable and not guaranteed.

Fundamental Data

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS (p)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
31-03-2008	11,423.00	2,192.00	60.50	14.40	0.60	25.00	33.00	4.80
31-03-2007	8,695.00	1,751.00	48.10	20.80	n/a	(16.00)	28.70	3.60
31-03-2006	8,868.00	1,718.00	41.60	12.60	1.60	8.00	26.10	4.60
31-03-2005	7,382.00	1,439.00	36.30	11.60	n/a	n/a	23.70	4.80
31-03-2004*	9,033.00	1,337.00	n/a	n/a	n/a	n/a	19.78	4.60

* Prior to 31st March 2005, figures were stated under UK Generally Accepted Accounting Principles (GAAP). Recent figures stated under International Financial Reporting Standards (IFRS).