National Grid reports 54.5% Net Income decline in 2018 while 1.4% Revenue growth
17 May 2018 • About National Grid (
$NG.) • By InTwits
National Grid reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- 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 20.8%
- CAPEX is quite volatile: 2,061 ZARm in FY2018, 1,069 ZARm in FY2017, 1,824 ZARm in FY2016, 808 ZARm in FY2015, 646 ZARm in FY2014
- The company has potentially unprofitable business model: ROIC is 6.8%
- It operates with high leverage: Net Debt/EBITDA is 5.2x while industry average is 3.8x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
National Grid's Revenue increased slightly on 1.4%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 1.8 pp from 19.3% to 17.5% in FY2018. During FY2014-FY2018 EBITDA Margin bottomed in FY2017 at 31.2%.
Net Income margin dropped on 28.6 pp from 51.8% to 23.3% in FY2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 24.5% in FY2018. National Grid's CAPEX/Revenue increased on 4.3 pp from 20.2% in FY2015 to 24.5% in FY2018. It's average level of CAPEX/Revenue for the last three years was 22.7%. National Grid maintained rich investment policy and has spent a big chunk of EBITDA (74.4%) to CAPEX. CAPEX as a % of Revenue grew at 1.1 pp per annum in FY2014-FY2018.
Return on investment
The company operates at good ROE (18.1%) while ROIC is low (6.8%). ROIC showed almost no change in FY2018. ROE dropped on 27.8 pp from 46.0% to 18.1% in FY2018. ROIC declined at -0.67 pp per annum in the last 5 years.
Leverage (Debt)
Debt level is 5.2x Net Debt / EBITDA and 5.3x Debt / EBITDA. Net Debt / EBITDA dropped on 0.6x from 5.9x to 5.2x in FY2018. Debt decreased on 7.0% while cash dropped on 71.1%.
National Grid has short term refinancing risk: cash is only 7.4% of short term debt.
Financial and operational results
FY ended 31 Mar 2018
National Grid ($NG.) key annual financial indicators| mln. £ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 14,809 | 15,201 | 13,212 | 15,035 | 15,250 | 1.4% |
| EBITDA | 5,152 | 5,274 | 4,536 | 4,689 | 5,023 | 7.1% |
| Net Income | 2,476 | 2,019 | 2,591 | 7,795 | 3,550 | -54.5% |
Balance Sheet
|
|---|
| Cash | 354 | 119 | 127 | 1,139 | 329 | -71.1% |
| Short Term Debt | 3,511 | 3,028 | 3,611 | 5,496 | 4,447 | -19.1% |
| Long Term Debt | 22,439 | 22,882 | 24,733 | 23,142 | 22,178 | -4.2% |
Cash flow
|
|---|
| Capex | 2,944 | 3,076 | 2,855 | 3,296 | 3,738 | 13.4% |
Ratios
|
|---|
| Revenue growth | 3.1% | 2.6% | -13.1% | 13.8% | 1.4% | |
| EBITDA growth | 0.8% | 2.4% | -14.0% | 3.4% | 7.1% | |
|
|---|
| EBITDA Margin | 34.8% | 34.7% | 34.3% | 31.2% | 32.9% | 1.8% |
| Net Income Margin | 16.7% | 13.3% | 19.6% | 51.8% | 23.3% | -28.6% |
| CAPEX, % of revenue | 19.9% | 20.2% | 21.6% | 21.9% | 24.5% | 2.6% |
|
|---|
| ROIC | 8.9% | 9.0% | 7.3% | 6.4% | 6.8% | 0.4% |
| ROE | 22.4% | 16.9% | 20.3% | 46.0% | 18.1% | -27.8% |
| Net Debt/EBITDA | 5.0x | 4.9x | 6.2x | 5.9x | 5.2x | -0.6x |
Peers in Gas, Water & Multiutilities
Below you can find National Grid benchmarking vs. other companies in Gas, Water & Multiutilities industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Dee Valley Group ($DVW) | 4.3% | 3.4% | -5.9% | 16.2% | |
| Inter RAO JSC ($IRAO) | 11.9% | 12.3% | 4.4% | 5.6% | |
| Centrica ($CNA) | 10.7% | -4.9% | -3.1% | 3.4% | |
| United Utilities Group ($UU.) | 3.2% | 1.9% | 0.6% | -1.5% | |
| |
|---|
| Median (4 companies) | 7.5% | 2.6% | -1.3% | 4.5% | |
|---|
| National Grid ($NG.) | | 2.6% | -13.1% | 13.8% | 1.4% |
Top companies by Gross margin, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Centrica ($CNA) | 11.0% | 15.6% | 20.1% | 14.9% | |
| |
|---|
| Median (1 company) | 54.0% | 56.2% | 58.3% | 14.9% | |
|---|
Top companies by EBITDA margin, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| United Utilities Group ($UU.) | 57.3% | 58.5% | 53.8% | 56.9% | |
| Dee Valley Group ($DVW) | 50.5% | 49.2% | 49.1% | 31.8% | |
| Inter RAO JSC ($IRAO) | 5.6% | 5.9% | 11.5% | 8.4% | |
| Centrica ($CNA) | 6.1% | 1.9% | 13.3% | 8.0% | |
| |
|---|
| Median (4 companies) | 28.3% | 27.6% | 31.2% | 20.1% | |
|---|
| National Grid ($NG.) | 34.8% | 34.7% | 34.3% | 31.2% | 32.9% |
Top companies by CAPEX/Revenue, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| United Utilities Group ($UU.) | 39.2% | 38.7% | 36.7% | 39.5% | |
| Dee Valley Group ($DVW) | 28.1% | 27.3% | 24.3% | 33.3% | |
| Inter RAO JSC ($IRAO) | 4.9% | 3.5% | 4.0% | 3.4% | |
| Centrica ($CNA) | 5.0% | 3.5% | 3.1% | 3.1% | |
| |
|---|
| Median (4 companies) | 16.5% | 15.4% | 14.2% | 18.4% | |
|---|
| National Grid ($NG.) | 19.9% | 20.2% | 21.6% | 21.9% | 24.5% |
Top companies by ROIC, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Inter RAO JSC ($IRAO) | 4.4% | 5.5% | 17.3% | 11.8% | |
| United Utilities Group ($UU.) | 6.8% | 6.7% | 5.4% | 5.5% | |
| Centrica ($CNA) | -11.1% | -11.7% | 28.5% | 4.9% | |
| Dee Valley Group ($DVW) | 7.5% | 7.4% | 6.4% | 3.4% | |
| |
|---|
| Median (4 companies) | 5.6% | 6.1% | 11.8% | 5.2% | |
|---|
| National Grid ($NG.) | 8.9% | 9.0% | 7.3% | 6.4% | 6.8% |
Top companies by Net Debt / EBITDA
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| United Utilities Group ($UU.) | 6.1x | 6.4x | 7.3x | 7.4x | |
| Dee Valley Group ($DVW) | 4.2x | 4.2x | 4.4x | 6.5x | |
| Centrica ($CNA) | 3.5x | 10.1x | 1.2x | 1.5x | |
| Inter RAO JSC ($IRAO) | 0.7x | 0.2x | -0.8x | -1.6x | |
| |
|---|
| Median (4 companies) | 3.8x | 5.3x | 2.8x | 4.0x | |
|---|
| National Grid ($NG.) | 5.0x | 4.9x | 6.2x | 5.9x | 5.2x |
