National Grid half year results up 2pc - interim dividend up 8pc!

National Grid half year results for the six months ended 30 September rose 2%

National Grid appears to be well placed to deliver another good year after posting a small improvement in underlying profit at the half-year stage

National Grid 2010 half year results announcement on November 18th, 2010, reassured investors that the Group is on track, following its £3.2bn rights issue earlier in May, to turn in a strong performance for the full year after a sharp rise in profits at the half year stage.

Stripping out exceptional items, Group pre-tax profits for the six months to September 30, rose a massive 45 per cent to £971m from £944m over the same period the previous year, driven by strong performances in every part of the business.

Commenting on the interim results, National Grid's chief executive Steve Holliday said

"Operating profits were up 31% on last year. This is driven by strong performance in all our businesses and the continued growth of our asset base.

This period's profit growth is additionally driven by timing impacts, as we had a significant under-recovery of revenues in the first half of last year.

In line with our policy, we are increasing the rebased interim dividend by 8%."

A short interview with Steve Holliday talking about these results is available.

National Grid half year results - summary

During the first half, the power and gas network company generated revenues of £1.9bn, up 4 per cent when compared with the year before.

Overall group operating profits were up 31 per cent to £1.51bn, driven by a doubling of profits in electricity distribution and generation to £360m.

National Grid half year results were helped by 'one-off' events such as this Summer’s hot weather in the USA, which resulted in high use of air conditioner units on the East Coast where the largest part of National Grid’s interests reside, and the outcome of two electricity charging cases in the US.

Gas distribution profits also rose around 30 per cent, mainly due to a reversal of last year's under-recovery, lower bad debts and operating costs.

Profits from the larger transmission business increased 13 per cent to £724m as the group changed its billing profile and experienced higher demand.

Debt and finance costs

Net finance costs increased by £70m to £574m, during the period, reflecting the impact of UK inflation on National Grid's index linked debt, compared to deflation in the same period last year, partly offset by a reduction in net pension interest. Net debt decreased by £2.9bn from 31 March 2010 to £19.2bn reflecting the receipt of £3.2bn from the rights issue in June.

Credit rating

Since March, Moody's Investor Services, Fitch Ratings and Standard & Poor's have all reaffirmed National Grid's credit ratings with stable outlook. National Grid half year results will further have underpinned these. National Grid's UK operating companies have low single A credit ratings.

Capex

Analysts estimate the company will have to spend £35bn on infrastructure investment over the next decade on which it makes regulated returns. The company has already started to increase spending on its UK transmission business, following its £3.2bn rights issue in June.

In the interview with Steve Holliday, Mr Holliday insisted that the company's balance sheet is strong enough to withstand all the capital demands of the UK's ageing networks.

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