National Grid PLC - Creating New Ways to Improve Performance and Build Future Capabilities

National Grid Plc (LON: NG.) is a London, United Kingdom-based electricity and gas utility company. It operates in the United Kingdom and the United States, focusing on transmission and distribution activities.
The Company will announce its 2019/20 Full Year Results on 18^th June 2020.

Pre-Close Update – Reflecting Decent Performance (2nd April 2020)
On 2^nd April 2020, National Grid released an update on pre-closing performance for FY2019/2020. The company expect performance to be in line with previous set guidance. The balance sheet stays healthy, with undrawn committed bank facilities of 5.5 billion pounds.  National Grid has been taking several actions to manage the impact of the COVID-19 outbreak. At present, the company did not see any material impact of Covid-19 but started experiencing disruptions and delays in its capital programme.

Share Price Performance

Daily Chart as of May 29^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

National Grid Plc shares were trading at GBX 930.60 at the time of writing before the market close (at 8:53 AM GMT+1) on 29^th May 2020 and up by 0.37% versus the previous day closing price. Stock's 52 weeks High is GBX 1,073.80 and Low is GBX 772.50.

From the technical standpoint, 14-day RSI is currently hovering in an overbought zone, and stock price can decline further.

Valuation Methodology


Conclusion
After the outbreak of Covid-19, National Grid delayed in the publishing of its full-year results in June mid. The group do not expect any material impact on the performance of business due to coronavirus pandemic but starting to witness some disruption and delays in the capital programme. NG. has suspended the collection of debt in the US market. The group is focused on reducing emissions to net-zero by the year 2050 and is committed to generate cleaner energy in future and lead the industry. The Company reported a decline in profit before tax in the first half of 2020. The Company’s share price is trading near its 52-week mid, which raises doubt over its upside potential.

Based on the headwinds faced by the group, we have given a "Watch" recommendation at the current price of GBX 935.00 (as on 29^th May 2020, before the market close at 8:10 AM GMT+1), while we look for any upcoming catalysts in the near term.

SSE Plc – Focused Transition to Net Zero and On-track to Achieve Key Financial Goals

SSE Plc (LON: SSE) is an integrated energy utility group, with investments and operations across Ireland and UK.

The Company will announce its 2019/20 Full Year Results on 17^th June 2020.

Trading Update – Impact of Covid-19 on Business Performance (27^th March 2020)
On 27^th March 2020, SSE released an update before the end of FY2020. SSE’s adjusted earnings per share (EPS) expected at the lower end of 83-88 pence range in January 2020; this is before any Coronavirus impact that may become apparent and need to be reflected in the financial statements for the year. Regarding the liquidity position, the Group reported a committed bank facility of GBP 1.5 billion. Among this facility, GBP 75 million is currently drawn. Despite the current headwinds, the Board intends to propose a full-year dividend per share of 80 pence for the financial year 2020.

Share Price Performance

Daily Chart as of May 29^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

SSE Plc shares were trading at GBX 1,243.00 at the time of writing before the market close (at 9:00 AM GMT+1) on 29^th May 2020 and up by 1.06% versus the previous day closing price. Stock's 52 weeks High is GBX 1,703.00 and Low is GBX 1,031.00.

From the technical standpoint, its shares were trading well above its short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock and carrying the potential to move up further.

Valuation Methodology


Conclusion
The defensive nature of the company and an intact demand for its services regardless of economic conditions created by COVID-19, offering a haven opportunity for investors. SSE is offering a steady and reliable dividend which makes it attractive among income investors. The long-term focus continues to be on assisting the transition to a net-zero economy, and this is reflected in the substantive growth made in recent months by the core, low-carbon networks and renewables businesses. Adjusted operating profit for its core businesses will show a year-on-year surge of approximately 25% for SSE Renewables. Net debt and hybrid capital expected to be approximately £10.7 billion on 31 March 2020.

Based on the decent growth prospects and the valuation done using the above method, we have given a “Hold” recommendation at the current price of GBX 1,221.00 (as on 29^th May 2020, before the market close at 10.50 AM GMT+1).

United Utilities Group Plc – Offering Services to over 3 million Businesses and Homes

United Utilities Group Plc (LON: UU.) manages electricity distribution, water distribution and wastewater network in the North West region of England.

Financial Highlights – Decent Underlying Performance in FY2020 (31st March 2020)

(Source: Annual Report, Company Website)

For the financial year ending 31st March 2020, the group’s revenue stood at GBP 1,859.3 million as against GBP 1,818.5 million in FY2019. The underlying operating profit stood at GBP 743.9 million in FY2020 versus GBP 684.8 million in FY2019. The reported operating profit declined slightly to GBP 630.3 million in FY2020 versus GBP 634.9 million in FY2019. The underlying PAT (profit after tax) stood at GBP 429.6 million in FY2020 versus GBP 407.9 million in FY2019. The reported PAT declined to GBP 106.8 million in FY2020 versus GBP 363.4 million in FY2019. The total dividend per share stood at 42.60 pence in FY2020 versus 41.28 pence in FY2019.

Share Price Performance

Daily Chart as of May 29^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

United Utilities Group Plc shares were trading at GBX 910.60 at the time of writing before the market close (at 12:00 PM GMT+1) on 29^th May 2020 and up by 1.18% versus the previous day closing price. Stock's 52 weeks High is GBX 1,068.50 and Low is GBX 743.00.

From the technical standpoint, its shares were trading well above its short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock and carrying the potential to move up further.

Valuation Methodology 


Conclusion
On Underlying basis, the group has shown an increase in financial performance for the financial year 2020. The Company provides excellent customer satisfaction in the water sector. The Group has steadily reduced the average household bill. UU is focusing on innovation, sustained investments, to deliver against a challenging set of performance targets, while also protecting and enhancing the environment and supporting the local communities. The Company operations are likely to get affected negatively due to uncertainty COVID-19 as it will result in uncertain political and economic climate for short to medium term.

Based on the decent growth prospects and the valuation done using the above method, we have given a “Hold” recommendation at the closing price of GBX 900.00 (as on 28^th May 2020).

Severn Trent Plc – Decent Operational Performance and Strong Balance Sheet

Severn Trent Plc (LON: SVT) is amongst the 10 largest water and sewerage regulated companies in England and Wales. The company is focused on providing high-quality services to both households and business customers.

Financial Highlights – Financial Performance for FY2020 (31st March 2020)

(Source: Annual Report, Company Website)
 
For the financial year ending 31^st March 2020, the group’s turnover for FY20 increased by GBP 76 million or 4.3 per cent to GBP 1,844 million as compared with GBP 1,767 million in FY2019. Reported PBIT (profit before interest and tax) stood at GBP 568 million, a growth of GBP 5 million (0.9 per cent) against GBP 563 million in FY2019. The adjusted basic earnings per share surged by 0.1 per cent to 146 pence in FY2020. The Board has recommended a final ordinary dividend per share of 60.05 pence for FY2020 versus 56.02 pence in FY2019. This gives a total ordinary dividend per share for the year of 100.08 pence (FY19: 93.37 pence).

Share Price Performance

Daily Chart as of May 29^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Severn Trent Plc shares were trading at GBX 2,459.00 at the time of writing before the market close (at 1:50 PM GMT+1) on 29^th May 2020 and up by 1.11% versus the previous day closing price. Stock's 52 weeks High is GBX 2,716.00 and Low is GBX 1,921.00.

From the technical standpoint, its shares were trading well above its short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock and carrying the potential to move up further.

Valuation Methodology


Conclusion
The Group reported decent financial results in FY2020. The business stays robust, and SVT has made further growth against the things that really matter to the clients with supply interruptions, water quality, and leakage complaints all improving. The Company has good financial resilience to manage the impact of the COVID-19 outbreak. The Company has a proven track record of paying consistent dividends. Further, SVT has consistently delivered ROE of above 15 per cent over the past five years.

Based on the decent growth prospects and the valuation done using the above method, we have given a “Hold” recommendation at the current price of GBX 2,430.00 (as on 29^th May 2020, before the market close at 9:50 AM GMT+1).

Centrica Plc – Energy Services and Solution Company Operating Internationally

Centrica Plc (LON: CNA) is a global energy solutions and services provider company, which concentrated on satisfying the changing needs of the clients and enabling the changeover to a lower-carbon future.

Recent News
On 27^th May 2020, Centrica announced that it had made an application to admit 10,000,000 shares of 6 ¹⁴/₈₁ pence each to London Stock Exchange Plc and FCA (Financial Conduct Authority).The shares will be issued as an award under Track Incentive Plan of Centrica and are booked under a block listing.

Trading Update and Impact of Covid-19 on Business Performance
On 2nd April 2020, Centrica released an update for trading and impact of Covid-19 on performance. The group has been taking multiple actions to maintain a robust balance sheet with adequate liquidity. At this stage, the company is not able to quantify the impact of Covid-19 on its financial performance. The group has taken necessary decisions to reduce cash expenditure in the financial year 2020 by approximately GBP 400 million. The group has decided to pause bonus payments and will not pay any Board level bonuses for the financial year 2019. The group has also decided to cancel the proposed final dividend payment for the financial year 2019 of 3.5 pence/share.

Share Price Performance

Daily Chart as of May 29^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Centrica Plc shares were trading at GBX 36.22 at the time of writing before the market close (at 2:56 PM GMT+1) on 29^th May 2020 and down by 7.25% versus the previous day closing price. Stock's 52 weeks High is GBX 97.02 and Low is GBX 29.10.

From the technical standpoint, 14-day RSI is currently hovering in an oversold zone and carry the potential to trigger an upside bump in the stock price.

Valuation Methodology


Conclusion
The Company reported a decline in its financial performance in the fiscal year 2020. CNA is focusing on improving customer relationships and giving further efficiencies, which could benefit in the development of the company. Improved margins from retail power in business energy supply could improve the financial performance in North America. The Company expects a decline in losses from Home Solutions and Business Solutions business could benefit its business and financial performance. There are certain risks and uncertainties associated with the company’s business. Credit risk for financial assets and Liquidity risk management could affect the operations of the Group. The company is still not able to quantify the impact on financial performance andbeen taking necessary measures to tackle the challenging period.

Based on the above rationale and the valuation done using the above methodology, we have given a “Buy” recommendation at the current price of GBX 36.13 (as on 29^th May 2020, before the market close at 2:30 PM GMT+1) with single-digit upside potential, based on the 6.40x Peers NTM Price/Earnings Multiple (approx.) on the FY21E earnings per share (approx.).
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.