Photographer: Rupert Hartley/Bloomberg

National Grid Slips as It Signals Drop in Earnings Per Share

  • Full-year pretax climbs 13 percent, beating estimates
  • Plans to increase dividend by at least retail price index

National Grid Plc retreated from a seven-month high after the U.K. utility said earnings per share was set to decline after selling its natural gas distribution business.

Underlying EPS would be about 10 percent lower under the company’s smaller structure, the London-based grid operator told investors in a conference call for its full-year results. Adjusted pretax profit rose 13 percent in the year through March, beating analysts’ estimates.

National Grid is adapting its networks to the rise of renewables, building interconnectors and installing rooftop solar in the U.S. It sold a majority of its U.K. natural gas distribution business for 3.6 billion pounds ($4.7 billion) in December to focus on areas with better growth prospects.

“We are not necessarily seeing the load growth on the gas side that you would have seen 10 years ago,” John Pettigrew, chief executive officer, said by phone. “The growth was starting to diminish.”

Profit will come under pressure from U.K. regulatory curbs on what the utility is allowed to earn from the power grid, Goldman Sachs & Co. said in an emailed note. It has a “sell” recommendation on the company.

The financial performance of its U.S. business is expected to improve, “benefiting from a full year of new rates in our downstate New York gas and Massachusetts Electric businesses,” the utility said in a statement.

National Grid fell 0.6 percent to 1,055 pence at 12:19 p.m. in London after earlier jumping to the highest since Oct. 6. The stock has climbed 11 percent this year, compared with a 7.5 percent gain in the Stoxx 600 Utilities index.

Underlying earnings per share would be 59.2 pence under National Grid’s new structure, compared with 66.1 pence before the sale of the gas distribution business, the company said.

Adjusted pretax profit rose 13 percent to 3.56 billion pounds in the year through March, 1.7 percent higher than the average estimate of analysts compiled by Bloomberg.

The final dividend per share was 29.1 pence for full-year payout of 44.27 pence.

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