Business Context and Reporting Period
Company: National Grid plc
Filing Type: Form 6-K (Pre-Close Update)
Date: April 18, 2024
Reporting Period: Full year ended March 31, 2024 (Results to be announced May 23, 2024)
This filing serves as a pre-close update ahead of the full-year results announcement. It outlines a significant change in financial reporting methodology regarding deferred tax in the UK Electricity Transmission and Distribution businesses.
Key Financial Metrics
- Underlying EPS Guidance: Expected to be in line with the prior year (2022/23) at actual exchange rates, excluding the impact of the reporting change detailed below.
- Reporting Change Impact: The new reporting definition is expected to increase Underlying EPS by approximately 8 pence per share.
- Revenue, Profit, Cash Flow, Debt, Liquidity: The filing text does not provide specific values for revenue, profit, cash flow, margins, debt, or liquidity for the current or prior periods.
Material Changes Versus Prior Period
The primary material change is a revision to the definition of Underlying Earnings and Underlying EPS. To align with UK peers and more accurately represent underlying profitability, the company will now exclude the impact of deferred tax in its UK Electricity Transmission and Distribution businesses.
This change is driven by the UK Government's introduction of 'full expensing' tax relief for qualifying capital expenditure in the 2023 Spring Budget, which became permanent in November 2023.
Guidance, Outlook, and Risks
Outlook and Management Commentary
Management expects Underlying EPS for 2023/24 to remain flat compared to the prior year before adjusting for the new reporting definition. Once the reporting change is applied, the reported Underlying EPS is projected to rise by roughly 8 pence per share.
Risks and Contingencies
The filing includes a comprehensive cautionary statement regarding forward-looking statements. Key risks identified include:
- Regulatory changes, including RIIO-T2 and RIIO-ED2 price controls and proposals for the future of system operation in the UK.
- Climate-related risks, network failures due to adverse weather, and infrastructure damage.
- Delays in third-party generation projects and energy supply disruptions.
- Fluctuations in exchange rates, interest rates, and commodity prices.
- Execution risks related to the sale of the UK gas transmission and metering business and the transfer of the electricity system operator to the public sector.
Investor Verification Checklist
- Verify the exact calculation of the 8 pence per share increase in Underlying EPS upon the release of the full-year results on May 23, 2024.
- Review the detailed note on the change to the definition of Underlying Earnings and Underlying EPS on the company's investor website.
- Confirm the final Underlying EPS figure for 2023/24 to ensure it aligns with the "in line with prior year" guidance (pre-adjustment).
- Monitor updates on the UK Government's 'full expensing' tax relief implementation and its specific impact on the company's deferred tax calculations.