National Grid plc: Half-Year Results Summary (Period Ended 30 September 2023)
Business Context and Reporting Period
This Form 6-K reports the unaudited half-year results for National Grid plc for the six months ended 30 September 2023. The company is a leading energy transmission and distribution operator in the UK and US, currently executing a strategic pivot to focus on electricity networks to support the energy transition. The reporting period includes the first year of the new RIIO-ED2 price control in the UK and continued progress on major transmission projects in both jurisdictions.
Key Financial Metrics
| Metric | 2023 (Six Months) | 2022 (Six Months) | Change |
|---|---|---|---|
| Statutory Operating Profit (Continuing) | £1,985 million | £2,239 million | (11%) |
| Underlying Operating Profit (Continuing) | £1,796 million | £2,117 million | (15%) |
| Statutory Profit Before Tax | £1,371 million | £1,666 million | (18%) |
| Statutory EPS | 28.8p | 33.4p | (14%) |
| Underlying EPS | 23.8p | 32.4p | (27%) |
| Capital Investment (Continuing) | £3,868 million | £3,883 million | 0% |
| Regulated Network Investment | £3,529 million | £3,298 million | +7% (Actual) / +10% (Constant Currency) |
| Net Debt (as at 30 Sep 2023) | £43.9 billion | £41.0 billion (as at 31 Mar 2023) | +£2.9 billion |
| Interim Dividend per Share | 19.40p | 17.84p | +9% |
Material Changes vs. Prior Period
- Profit Decline Drivers: The decrease in underlying operating profit (15% at actual rates, 14% at constant currency) is primarily due to the non-repetition of significant one-off gains in the prior period, including £201 million from St William property land sales, £53 million from the Narragansett Electric Company (NECO) contribution, and £70 million in insurance proceeds from the IFA1 interconnector fire.
- Segment Performance: UK Electricity Transmission statutory profit rose 70% to £838 million, driven by favorable timing swings and indexation. Conversely, New England reported a statutory loss of £47 million compared to a profit of £720 million in the prior year, largely due to the disposal of NECO and adverse timing swings.
- Investment Growth: Capital investment in regulated networks reached a record £3.5 billion, up 10% at constant currency, driven by Accelerated Strategic Transmission Investment (ASTI) projects in the UK and new transmission projects in New York.
- Efficiency Savings: The Group achieved an additional £53 million in efficiency savings, bringing the cumulative total to £426 million, exceeding the £400 million target ahead of schedule.
Guidance, Outlook, and Management Commentary
- Updated Five-Year Framework (2020/21 to 2025/26):
- Total cumulative capital investment updated to around £42 billion.
- Asset growth CAGR expected at 8-10%.
- Underlying EPS CAGR expected at 6-8% from the 2020/21 baseline of 54.2p.
- Regulatory gearing expected to remain in the low 70% range.
- 2023/24 Outlook: Underlying EPS for the full year is expected to be modestly below 2022/23 levels due to a change in UK capital allowances legislation (estimated 6-7p per share impact). Without this legislative change, EPS was forecast to grow within the 6-8% CAGR range.
- Strategic Progress:
- UK: Ofgem placed 17 ASTI projects into the operating licence. The Energy Act 2023 received Royal Assent, enabling the separation of the Electricity System Operator (ESO).
- US: Received FERC approval for the Smart Path Connect project in New York. The Twin States Clean Energy Link was selected by the US DOE for the next negotiation stage.
- Disposal: Agreed to sell a further 20% stake in National Gas Transmission to the Macquarie/BCI consortium, with an option for the consortium to acquire the remaining 20% in 2024.
- Risks and Contingencies: Key risks include regulatory outcomes, supply chain constraints, cyber security threats, and the impact of climate change on infrastructure. The ESO was classified as held for sale in October 2023 following legislative approval for its separation.
Key Facts for Investor Verification
- Dividend Policy: The interim dividend of 19.40p represents 35% of the total dividend for the last financial year, consistent with policy. The Board aims to grow the annual dividend in line with UK CPIH.
- Capital Allowances Impact: Verify the specific 6-7p per share impact on 2023/24 EPS resulting from the UK government's change to capital allowances legislation effective 1 April 2023.
- Net Debt Trajectory: Net debt is expected to increase by approximately £3.5 billion during the full year 2023/24 to fund critical infrastructure investment, with regulatory gearing remaining broadly flat.
- ASTI Investment Scale: The company estimates total outturn investment for the 17 ASTI projects to be in the "mid-to-high teens" range (£bn), with £3 billion expected within the current five-year framework.
- Discontinued Operations: Confirm that results for UK Gas Transmission are classified as discontinued operations following the sale of a 60% stake in January 2023 and the agreement to sell a further 20%.