Business Context and Reporting Period
Company: National Grid plc
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended March 31, 2009
Accounting Basis: International Financial Reporting Standards (IFRS)
Operations: The Company operates regulated electricity and gas transmission and distribution networks in the United Kingdom and the United States. The reporting period includes the impact of the acquisition of KeySpan Corporation (August 2007) and excludes discontinued operations such as the Ravenswood generation station and former wireless businesses.
Key Financial Metrics
| Metric | 2009 (£m) | 2008 (£m) |
|---|---|---|
| Revenue | 15,624 | 11,423 |
| Total Operating Profit | 2,623 | 2,964 |
| Profit for the Year (Continuing Ops) | 922 | 1,575 |
| Profit for the Year (Total) | 947 | 3,193 |
| Basic EPS (Continuing Ops) | 37.4 pence | 60.3 pence |
| Total Assets | 44,467 | 37,771 |
| Net Assets | 3,984 | 5,374 |
| Dividends Paid (per share) | 33.94 pence | 29.5 pence |
Note: The filing text does not provide specific values for cash flow from operations, total debt, or liquidity ratios in the summary sections. These details are incorporated by reference from the Annual Report and Accounts (Exhibit 15.1).
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased by approximately 37% to £15.6 billion, driven primarily by the inclusion of KeySpan Corporation operations and the acquisition of Rhode Island gas distribution.
- Profit Decline: Profit for the year from continuing operations fell 41% to £922 million. Total profit for the year dropped significantly to £947 million from £3.19 billion in 2008, largely due to the absence of one-off gains from asset disposals recorded in the prior year (e.g., Ravenswood generation station).
- Earnings Per Share: Basic EPS from continuing operations decreased from 60.3 pence to 37.4 pence.
- Share Capital: The number of basic shares outstanding decreased from 2,609 million to 2,455 million, reflecting ongoing share buy-back activities.
Guidance, Outlook, and Risks
Management Commentary & Strategy:
- Share Buy-back Suspension: Due to the current financial environment, the Company suspended its share buy-back programme and is no longer planning to return stranded asset cash flows via repurchases in 2009/10.
- Dividends: Dividends per ordinary share approved or proposed for the year were 35.64 pence, an increase from the prior year's 33.0 pence.
- Capital Markets: Management highlighted risks regarding the ability to access capital markets on acceptable terms given the deterioration of global economic and financial market conditions.
Risk Factors:
- Regulatory & Legal: Delays in regulatory approvals, changes in laws/regulations, and the regulatory treatment of pension costs.
- Operational: Unseasonable weather affecting demand, competition, and potential outages on energy networks.
- Financial: Currency fluctuations (GBP/USD), changes in interest rates, and energy market price volatility.
- Integration: Risks associated with integrating acquired businesses (KeySpan) and realizing expected synergies.
Investor Verification Checklist
- Debt and Liquidity: Verify total debt levels, interest coverage ratios, and liquidity positions in the full Annual Report (Exhibit 15.1) as these are not detailed in the Form 20-F summary text.
- Cash Flow: Review the Consolidated Cash Flow Statement to assess operating cash flow generation versus capital expenditure requirements.
- Discontinued Operations: Confirm the specific financial impact of discontinued businesses (Ravenswood, wireless, interconnector) to understand the true trajectory of continuing operations.
- Share Buy-back Status: Monitor the status of the suspended share buy-back programme and future capital return strategies.
- Exchange Rate Sensitivity: Assess the impact of the GBP/USD exchange rate (averaging 1.54 in 2008/09 vs 2.01 in 2007/08) on reported US dollar earnings and dividends.