HY23/24: Guidance maintained, capex still growing

The initial 2021-2026 £30-35bn investment plan unveiled in November 2021 which was transformed into ‘up to £40bn’ in November 2022 is now expected to be around £42bn. This represents a programme build-up to increase the asset base at a 8-10% CAGR and EPS at 6-8% while maintaining regulatory gearing in the low-70% range.

FY22/23: High visibility on inflation-protected results

National Grid published strong FY22/23 earnings (year ended March 31) reaffirming the strength of its business mix during inflationary periods. The group completed its strategic pivot with the disposal of 60% of the UK Gas assets to focus mainly on electricity transmission/distribution over an intensive 2026 £40bn capex plan. The outlook over the five-year period 2020/21 to 2025/26 remains unchanged.

HY22/23: resilient business model supported by an ambitious Capex plan FY202

An encouraging set of half year results from National Grid, reflecting the resilience of the model in a challenging and turbulent macroeconomic environment, mainly driven by the regulatory frameworks and electricity transmission and distribution. National Grid upgraded its Capex guidance to £40bn between 2022 and 2026 to accelerate its transition to low carbon generation and enhancing its UK and US electricity distribution as well as the underlying EPS growing in the middle of the 6-8% CAGR rang

FY21/22: rock-solid

National Grid confirmed its safe-haven status by unveiling a strong set of FY21/22 figures, c. 3.3% above the consensus. The group is moving forward serenely, benefiting from its natural inflation indexation both at operational and dividend levels. The mid-term FY25/26 plan is backed even if the FY22/23 outlook expected at ‘broadly flat’ is admittedly a miss. But who cares? NG is the perfect benchmark for a flight-to-quality for investors awaiting better times.

H1 21/22 and CMD: the quiet strength

National Grid beat expectations at the EPS level (+8.6% vs consensus) for its H1 21/22 results, mainly driven by the WPD acquisition, higher regulated tariffs and the post-pandemic recovery. As a result, the full-year outlook was improved. The group also unveiled its 2026 roadmap: £35bn capex in networks, both in the US and in the UK, to increase the asset base and support the expansion of renewables. The plan is in line with our expectations, even if the funding issues were relatively unaddre

Not yet running at full power

National Grid saw its adjusted operating profit down by 12% for the FY20/21 (fiscal year ending in March), especially driven by the adverse timing of recovery movements and COVID-19. These results are well below our (bullish) expectations. However, the network giant provided a promising 5-year guidance in terms of capex (£30-35bn to 2026) and EPS CAGR (5-7%). WPD / NECO / NGG deals are on track. Note also a surprising but pleasant JV with RWE to develop US offshore wind.

From US expansion to UK consolidation

National Grid has engaged in a significant asset swap with PPL Corporation to buy UK-based grid activities for £14.2bn (EV) and to sell US-based gas and electricity activities for £3.7bn. The group also plans the sale of its UK-based gas division and is thus shifting from a US growth-driven strategy to UK asset consolidation, and therefore moving towards greater exposure to the growing electricity market. A strategically promising move.

FY19/20 - impacted by US activities

Below market expectations, but in line with our estimates. Operating profit was flat compared to last year and came in at £3,454m (consensus was £3,590m, our estimate was £3,442m). EPS decreased by 1.5% to 58.2p (consensus was 59p, our estimate was 58.1p). Dividend increased by 2.6% to 48.57p (consensus was 48.7p, our estimate was 48.8p). The group estimates the impact on operating income to be in the region of £400m, but recoverable over future years.

H1: the US ensures growth

Solid H1 19/20, backed by the good progression in the UK and a slight increase in the UK Electricity Transmission division. After the promising investments, the group is well on track to meet its asset growth guidance of 5-7%. Positive view confirmed.

STATE OF CHARGE - INVESTMENT OPPORTUNITIES IN EV CHARGING

Government bans on new fossil fueled vehicles in many major economies are likely to drive significant growth in electric vehicles (“EVs”) over the next twenty years. This will create growth in electricity demand from EV charging. The volume of energy to be supplied creates opportunities for both supply companies and generators and the provision of charge points is already creating a new industry. However, the timing of this demand puts pressure on local distribution infrastructure. While smart c

Good FY18/19 results spoiled by nationalisation risk

National Grid released a good set of FY18/19 results. Activities in the US continue to lead the RAV growth and the group continues to invest in the UK to increase the quality of its network. But this good publication was spoiled by Labour’s suggestion to nationalise the energy networks. Although this seems unlikely, it will be a driver of the stock price in the short term.

Lower taxes and headcount offset higher storm costs

National Grid released a set of H1 results which were broadly in line with our expectations. The underlying operating profit fell 6% but NG was able to post 6% growth in underlying EPS – broadly in line with our estimates – as the tax rate declined to 19.3% from 22.9% (US-driven) while the Electricity Transmission business in the UK performed well. The group confirmed its dividend policy. We stick to our Buy recommendation.

US-driven FY17

National Grid reported a good set of FY17-18 results, driven by the US activities, which posted a +20% increase in underlying operating profit fuelled by the 7% rate base growth and favourable rates renewals during the period. The board proposed a FY dividend of 45.93p, up c.3.7%, in line with RPI. The company provided a reassuring outlook and expects growth at the top end of the guided 5-7% range for the medium term, driven notably by the US market.

Nationalisation debate continues, while higher inflation weighs

The company has reported weak H1 results with reported profit down 12.7% to £1.27bn, but up 4% to £1.4bn on an adjusted basis for one-offs and timing effects. The group has reported EPS down 11.75% to 19.5p/share and -13.2% on an adjusted basis. Despite this, and in line with its dividend policy to pay a dividend growth linked to inflation, the group will pay an interim dividend of 15.5p/share which represents 2.1% growth. The group maintains, nonetheless, its full-year outlook as it expects t

Positive FY16/17 results supported by strong US performance; 2017/18 EPS below expectations

The group has published positive full-year results with adjusted operating profit increasing by 14% to £4,667m, profit before tax increasing 13% to £3,555m and EPS growing 16% to 73p. These are all better than expected. The strong yearly performance was mainly driven by the US (+45%), UK electricity transmission (+17%) and gas transmission (+5%). Gas distribution was up 2%. Net debt reached £19.6bn (-19.7%). On a reported basis, the group published operating profit increasing by 0.5% to £4,102m

Renold - Strong end to FY24: EPS up 11%. Robust FY25: EPS up 27.6%

The FY24 year-end update is very upbeat signalling trading being materially ahead of expectations, with a better-than-expected profit out turn and stronger cash generation. It continues to strengthen margins through efficiencies and investment in modern equipment. The order book remains close to record levels providing a robust view of future forecasts. In FY24E we upgrade EPS by 11% and in FY25E a significant upgrade of 27.6%. It looks capable of declaring a dividend in FY25 as well as manageme

Billington Holdings - Record result boosts dividend; forecasts upgraded

FY23 results show very strong growth over FY22, driven by strong Structural Steel activity, with results slightly ahead of upgraded profit expectations, while stronger than expected cash flow resulted in an unexpectedly generous dividend of 33p (offering a FY23 yield of 7.0%). The group now has net cash of £22.1m and is debt free and is therefore in a strong position for potential M&A activity. Following the recent £90m of new orders to increase the order book to record levels we conservatively

Morning Note – 16 April 2024

Morning Note – 15 April 2024

Warns on brine supply costs

PROGRESSIVE: Severfield: Targeted acquisition strategy aids growth path

Acquisitions have been an important element of Severfield management’s growth strategy, with the aim of adding new products, sectors and regions to what we have identified as exciting long-term organic opportunities. In this Spotlight report, we focus on the group’s targeted M&A approach, highlighting three significant deals.

SP Angel . Morning View . Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

Invinity Energy Systems - Update on Strategic Investment

Invinity’s update on discussions with strategic investors reveals interest from multiple parties. While this has slightly delayed finalising an agreement it increases the potential for a better outcome. Although details are unknown at this stage, we think there is enough in the statement to be comfortable that any agreements will be consistent with the company’s strategy of growing market share in core markets and using a licencing and royalty model in other markets.

FY results: strong cash flow

Clean and competitive fertiliser

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

Windar Photonics - Major order, successful net £4m fund-raise, target fair value price raised

WPHO's announcement last week of a major new contract award with a North American customer represented an encouraging step forward in building the group's presence in this crucial market for wind power; and has been followed by news of the over-subscribed fund-raise which has strengthened the company's balance sheet to the tune of £4m net (£4.4m gross). The company is a pioneer in the field of wind turbine optimisation and continues to grow through innovation based on its unique IP. Following th

LIBERUM: Gattaca: Resilient contract performance, perm tough

Norcros - FY24 trading in line with expectations

FY24 trading underpins Norcros’s compelling investment case, where its new product development initiatives, market positioning and self-help initiatives allow it to take market share in both the UK and South Africa. We believe that Norcros’s key strengths are underappreciated and that legacy issues have been resolved. Its rating is low at 5.6x FY24e P/E, which is attractive, especially when compared to its yield of 5.7% on its well-covered dividend. We retain our estimates and value the shares a

Trading report in-line with sector peers

The results for the six-months to January are robust against a backdrop of declining confidence in both clients and candidates generally. With an improvement in the contract book during early Q3 we think this highlights that the tide is starting to turn and likely to feed through to demand for permanent hires ahead of the CY24 end. With net cash accounting for over 70% of the current market capitalisation, the operating business appears undervalued. H1 results were broadly in line with expectat