National Grid Net Income jumped on 28.3% in 2016 and EBITDA Margin increased on 3.0 pp from 34.7% to 37.7%
19 May 2016 • About National Grid (
$NG.) • By InTwits
National Grid reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- National Grid has high CAPEX intensity: 5 year average CAPEX/Revenue was 21.6%. At the same time it's in pair with industry average of 23.0%.
- CAPEX is quite volatile: 362 in 2016, 252 in 2015, 735 in 2014, 1,528 in 2013, 457 in 2012
- The company has business model with low profitability: ROIC is at 9.2%
- It operates with high leverage: Net Debt/EBITDA is 5.0x while industry average is 3.9x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
National Grid ($NG.) key annual financial indicators
| mln. £ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 13,832 | 14,359 | 14,809 | 15,201 | 15,115 | -0.6% |
| EBITDA | 4,821 | 5,110 | 5,152 | 5,274 | 5,699 | 8.1% |
| Net Income | 2,036 | 2,153 | 2,476 | 2,019 | 2,591 | 28.3% |
Balance Sheet
|
|---|
| Cash | 332 | 671 | 354 | 119 | 127 | 6.7% |
| Short Term Debt | 2,492 | 3,448 | 3,511 | 3,028 | 3,611 | 19.3% |
| Long Term Debt | 20,533 | 24,647 | 22,439 | 22,882 | 24,733 | 8.1% |
Cash flow
|
|---|
| Capex | 3,147 | 3,214 | 2,944 | 3,076 | 3,408 | 10.8% |
Ratios
|
|---|
| Revenue growth | -3.6% | 3.8% | 3.1% | 2.6% | -0.6% | |
| EBITDA growth | -3.4% | 6.0% | 0.8% | 2.4% | 8.1% | |
| EBITDA Margin | 34.9% | 35.6% | 34.8% | 34.7% | 37.7% | 3.0% |
| Net Income Margin | 14.7% | 15.0% | 16.7% | 13.3% | 17.1% | 3.9% |
| CAPEX, % of revenue | 22.8% | 22.4% | 19.9% | 20.2% | 22.5% | 2.3% |
| ROIC | 9.8% | 9.6% | 8.9% | 9.0% | 9.2% | 0.2% |
| ROE | 22.3% | 22.1% | 22.4% | 16.9% | 20.3% | 3.4% |
| Net Debt/EBITDA | 4.7x | 5.4x | 5.0x | 4.9x | 5.0x | 0.1x |
Revenue and profitability
National Grid's Revenue decreased slightly on 0.57% in FY2016. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.0 pp from 34.7% to 37.7% in FY2016.
Net Income marign increased on 3.9 pp from 13.3% to 17.1% in FY2016.
Capital expenditures (CAPEX) and working capital investments
In FY2016 National Grid had CAPEX/Revenue of 22.5%. CAPEX/Revenue showed almost no change from FY2013 to FY2016. For the last three years the average CAPEX/Revenue was 20.9%.Battling declining revenue the company invested a large share of EBITDA (59.8%) to CAPEX but that didn't help at least in this year.
Return on investment
The company operates at good ROE (20.31%) while ROIC is low (9.21%). ROIC showed almost no change in FY2016. ROE increased on 3.4 pp from 16.9% to 20.3% in FY2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 5.0x and Debt / EBITDA is 5.0x. Net Debt / EBITDA increased on 0.1x from 4.9x to 5.0x in FY2016. Debt increased on 9.4% in FY2016 while cash increased on 6.7% in FY2016.
Valuation
National Grid's trades at EV/EBITDA 5.0x and P/E 0.2x while industy averages are 15.6x and 19.1x. The company's EV/(EBITDA-CAPEX) is 12.5x with the industry average at 19.0x.
Appendix 1: Peers in Gas, Water & Multiutilities
Below we provide National Grid benchmarking against other companies in Gas, Water & Multiutilities industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Inter RAO JSC ($IRAO) | 3.7% | 19.1% | 11.9% | 12.3% | |
| Dee Valley Group ($DVW) | 3.5% | 3.2% | 4.3% | 3.4% | |
| United Utilities Group ($UU.) | 3.4% | 4.5% | 3.2% | 1.9% | |
| |
|---|
| Median (3 companies) | 3.5% | 4.5% | 4.3% | 3.4% | |
|---|
| National Grid ($NG.) | | 3.8% | 3.1% | 2.6% | -0.6% |
Top companies by Gross margin, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Dee Valley Group ($DVW) | 97.0% | 96.9% | 97.0% | 96.9% | |
| |
|---|
| Median (1 company) | 97.0% | 96.9% | 97.0% | 96.9% | |
|---|
Top companies by EBITDA margin, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| United Utilities Group ($UU.) | 56.8% | 56.9% | 57.3% | 58.5% | |
| Dee Valley Group ($DVW) | 56.4% | 53.5% | 50.5% | 49.2% | |
| Inter RAO JSC ($IRAO) | -2.7% | 0.8% | 5.6% | 5.9% | |
| |
|---|
| Median (3 companies) | 56.4% | 53.5% | 50.5% | 49.2% | |
|---|
| National Grid ($NG.) | 34.9% | 35.6% | 34.8% | 34.7% | 37.7% |
Top companies by CAPEX/Revenue, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| United Utilities Group ($UU.) | 32.1% | 38.2% | 39.2% | 38.7% | |
| Dee Valley Group ($DVW) | 32.0% | 66.9% | 28.1% | 27.3% | |
| Inter RAO JSC ($IRAO) | 8.8% | 6.2% | 4.9% | 3.5% | |
| |
|---|
| Median (3 companies) | 32.0% | 38.2% | 28.1% | 27.3% | |
|---|
| National Grid ($NG.) | 22.8% | 22.4% | 19.9% | 20.2% | 22.5% |
Top companies by ROIC, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Dee Valley Group ($DVW) | 8.2% | 7.9% | 7.5% | 7.4% | |
| United Utilities Group ($UU.) | 6.9% | 6.6% | 6.8% | 6.7% | |
| Inter RAO JSC ($IRAO) | -6.9% | -4.3% | 4.4% | 5.5% | |
| |
|---|
| Median (3 companies) | 6.9% | 6.6% | 6.8% | 6.7% | |
|---|
| National Grid ($NG.) | 9.8% | 9.6% | 8.9% | 9.0% | 9.2% |
Top companies by Net Debt / EBITDA
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| United Utilities Group ($UU.) | 6.2x | 6.4x | 6.1x | 6.4x | |
| Dee Valley Group ($DVW) | 3.2x | 4.0x | 4.2x | 4.2x | |
| Inter RAO JSC ($IRAO) | | 2.4x | 0.7x | 0.2x | |
| |
|---|
| Median (3 companies) | 4.7x | 4.0x | 4.2x | 4.2x | |
|---|
| National Grid ($NG.) | 4.7x | 5.4x | 5.0x | 4.9x | 5.0x |
