National Grid edges up capex projections

Energy supplier National Grid is targeting a four per cent increase in its dividend this fiscal year after turning in slightly better than expected figures for the year just ended.

Adjusted profit before tax in the year ended March 31st was £2,585m, up 5% from £2,473m the year before and ahead of market expectations of £2,545m. Excluding the impact of timing and major storms (such as Hurricane Irene), profit before tax increased by 23% using constant exchange rates.

Underlying earnings per share rose 1% to 51.3p from 50.9p the year before, and also topped investment analysts' expectations, which stood at 49.93p.

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Revenue eased to £13,832m from £14,343m the year before. The median forecast for revenue from the range of analyst forecasts was £14,482m.

Net debt rose to £19.6bn at March 31st compared with £18.7bn a year earlier and market expectations of debt of £20.4bn. Net finance costs were £917m, 18% lower than 2010/11 at constant currency. Net finance costs are expected to be around £100m higher in 2012/13, reflecting an increase in average net debt and a slightly higher effective interest rate.

Capital expenditure for 2012/13 is expected to be in the range of £3.5bn to £3.8bn, an increase from the previously indicated range of £3.2bn to £3.3bn. Net debt is expected to increase by around £1.5bn during 2012/13, excluding the effect of any exchange rate impacts.

The board has recommended an increase in the final dividend to 25.35p, bringing the full year dividend to 39.28p, up from 36.37p, and just about satisfying the group's stated policy (now revised) of targeting increases of at least 8% in the dividend payment. Nevertheless, the divi was a shade lower than expectations of a full year pay-out of 39.35p.

The board has agreed a new one year dividend policy under which it plans to increase the fiscal 2012/13 dividend by 4% in nominal terms over the proposed dividend of 39.28p for fiscal 2011/12. This new policy is in line with market expectations and reflects the outcome from the one year roll-over review of the UK Transmission price control and forecast UK inflation of around 3% for the same period. This new dividend policy will apply to the interim dividend to be paid in January 2013 and the final dividend to be paid in August 2013.

As previously stated, National Grid expects to announce a new dividend policy for the period from April 2013 during the course of 2013, once outcomes of key regulatory developments are clear.

The group said the restructuring of its US business is now complete and is delivering operational and financial benefits. Meanwhile, the existing price controls in the UK continue to deliver attractive returns, underpinning the board's optimism about operating and financial performance in the current financial year.

"We delivered another year of good underlying financial and operating performance despite the impact of some exceptional weather in the US. At the same time we made further progress developing the business consistent with our strategic priorities, maintaining an appropriate spread and balance of activities to support both long-term growth and dividends," said Steve Holliday, National Grid's Chief Executive.

JH