Thursday, British electricity and gas utility National Grid Plc (NGG, NG.L) reported a sharp fall in net profit for the first half, hurt by higher operating costs, while last year was benefited by a huge divestment gain.
On a pre-tax basis, profit fell 38%, despite strong revenue growth. Further, the company announced an 8% rise in interim dividend, and said it is performing in line with expectations for fiscal 2009.
First-half profit was GBP 425 million or 16.9 pence per share, compared to GBP 2.40 billion or 89.4 pence per share last year.
The first-half 2009 results included profit from discontinued operations of GBP 17 million, compared to last year's profit of GBP 1.61 billion, mainly related to the disposal of Ravenswood generating station in New York City to TransCanada Corp. (TRP) for $2.9 billion in cash.
Profit for the period from continuing operations was GBP 408 million or 16.3 pence per share, lower than GBP 785 million or 29.2 pence per share a year ago. This included exceptional items, remeasurements and stranded cost recoveries of GBP 25 million, compared to a gain of GBP 255 million a year ago.
On a business performance basis, before exceptional items, remeasurements and stranded cost recoveries, first-half profit from continuing operations declined to GBP 433 million or 17.4 pence per basic share from GBP 530 million or 19.8 pence per basic share a year ago.
National Grid's profit from continuing operations, on business performance-pro forma basis, as if KeySpan acquisition had completed on April 1, 2007 than August 24, 2007, was GBP 431 million or 17.4 pence per basic share, compared to last year's GBP 448 million or 16.8 pence per share.
First-half statutory pre-tax profit fell 38% to GBP 564 million from GBP 917 million last year. Business performance pre-tax profit declined 26% to GBP 558 million from prior year's GBP 757 million, while prior year's pro forma pre-tax profit was GBP 628 million.
The company's revenues for the six months climbed to GBP 6.07 billion from GBP 4.26 billion in the year-ago period.
Steve Holliday, Chief Executive, said, "We have delivered a good operating and financial performance this period. Our first half earnings reflect the seasonality of the former KeySpan businesses."
On a segmental basis, transmission revenue and other operating income grew 28% year-over-year to GBP 1.98 billion, and operating profit increased 3% to GBP 591 million.
In the Gas Distribution business, first-half revenue and other operating income surged 119% to GBP 1.86 billion, mainly driven by acquisition of KeySpan that almost doubled the division's size.
Revenues and other operating income from Electricity Distribution and Generation operations rose 28% to GBP 1.85 billion, while operating profit decreased 34% to GBP 129 million.
The company generated revenues and other operating income of GBP 356 million from non-regulated and other activities, 7% lower than last year.
In addition, National Grid said its Board approved an 8% increase in the interim dividend to 12.64 pence per ordinary share from last year's 11.70 pence, which will paid on January 21, 2009 to shareholders on the register as at December 5, 2008. On American Depositary Share basis, the dividend would be $0.9476 per share.
Looking ahead, National Grid noted that its outlook for the year 2009 is positive, and that it remains on track to deliver in line with expectations for the full year.
The company still expects a good performance across the portfolio of its businesses, including higher second half profits in Non-Regulated businesses offsetting timing issues in Electricity Distribution and Generation.
For the year, net interest charges are expected to be higher reflecting a full year of ownership of KeySpan, compared to only seven months last year. Also, full-year effective tax rate is expected to be around 28%, lower than the prior year, mainly due to the reduction in the UK corporation tax rate.
The company added that it is on track to achieve target of $100 million of KeySpan synergy savings by March 2009.
NGG closed Wednesday's regular trading session at $51.45, down $3.66, on a volume of 107 thousand shares.
NG.L is currently trading on the LSE at 674.50 pence, down 15.50 pence or 2.25%, on a volume of 4.5 million shares.
For comments and feedback: editorial@rttnews.com