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National Grid (LSE: NGG) delivered a set of half-year profit figures well ahead of expectations this morning. Turnover came in at £1.8b, boosted by recent acquisitions in the US. Operating profits before exceptional items rose 28% to £359m with the new US businesses offsetting a slight fall in UK transmission profits and increased losses in the Brazilian telecom joint venture with Sprint (NYSE: PCS) and France Telecom. The market had been expecting profits to fall.
Net debt stood at £3.8b and the interim dividend was lifted to 8.2% to 6.05p. National Grid said it intended to increase its dividends by 5% above the rate of inflation for the next 5 years, although the shares only yield 2.2% at this time. In September the company announced the acquisition of Niagara Mohawk (NYSE: NMK) for £2b. National Grid will also take on £4b of debt relating to this transaction. After this deal is completed more than half of group's profits will come from the US.
The Fool Says
National Grid has done its shareholders proud since it floated five years ago. Its shares have trebled, primarily due to the success of Energis (LSE: EGS). However, its remaining 34.6% holding only accounts for around 30% of National Grid's £9.5b market value. The majority of future growth will have to come from the group's forays into North America where it hopes the more relaxed regulatory regime will allow it to deliver returns its shareholders have become accustomed to. The next five years are unlikely to be as fruitful but National Grid still looks as if it will deliver solid returns.
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National Grid makes dividend pledge - FT
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EMI Pretends It Can Still Go Solo
EMI (LSE: EMI), the world's third largest record company, saw its half-year turnover increase 6% to £1144m this morning. But it slipped into the red with a pre tax loss of £10m thanks to the higher interest charges and £43m of costs relating to costs associated with the abandoned merger with Time Warner (NYSE: TWX). EMI said it was still reviewing the regulatory position with respect to Time Warner and confirmed that there were early stage discussions with BMG, the music division of Bertelsmann.
EMI has high hopes for the second half of the year with a release schedule that is "one of the strongest for many years". But EMI is still struggling in the key US market where margins narrowed significantly. The interim dividend was maintained at 4.25p. Net debt stands at £1.1b.
The Fool Says
EMI does itself no favours with the poor presentation of its numbers, which leave a great deal to be desired. Its turnover growth is minimal, profit margins are falling and debt is rising. Yet EMI still believes it has a bright future by itself. Its optimism looks misplaced and the best hope for shareholders remains that the company will manage to agree terms with BMG, although there are a number of obstacles to overcome. In the absence of any deal EMI's market value of £4.7b looks exceedingly generous.
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• EMI deal may take some weeks - FTMarketwatch
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