LONDON (ShareCast) - (Sharecast News) - National Grid increased its dividend in line with inflation as the power network operator reported a decline in annual profit caused by the Covid-19 crisis.
Underlying operating profit for the year to the end of March fell 5% to £3.28bn as cash flow from continuing operations fell £0.3bn to £4.6bn. Statutory pretax profit rose 19% to £2.08bn.

National Grid announced a final dividend of 32.16p a share, taking the annual payout to 49.16p a share - a 1.2% increase in line with the company's policy of raising the dividend in line with UK retail price inflation.

The company said cash flow was affected by adverse timing and increased storm costs, lower cash collections, lower revenues and costs as a result of Covid-19. It said the financial impact of the pandemic was less than expected.

The pandemic reduced operating profit by £355m compared with an earlier estimate of £400m. The recovery of £59m of bad debts reduced the cost further to £296m.

National Grid had guided investors to expect a £1bn effect on cash flow but the actual figure was about £600m. It said most of the costs would be recouped under regulatory agreements or through separate claims.

The FTSE 100 group announced a shift in strategy in March when it agreed to buy Western Power Distribution, the biggest UK electricity distribution business, for £7.8bn to focus on electricity while shedding gas distribution assets.

On Thursday National Grid predicted earnings would increase at a compound annual growth rate of 5-7% over five years and that it would spend a total of £30bn-35bn on capital projects during that time. Asset growth will be 6-8%, the company predicted.

Chief Executive John Pettigrew said: "In the past year we have successfully navigated the challenges of Covid-19, delivered over £5bn of capital investment and achieved a solid underlying financial performance.

"We also announced the transformational acquisition of WPD which will ensure National Grid is at the heart of the energy transition in the UK and enhance the future growth profile of the group. Our confidence in the group's prospects is reflected in the ambitious five-year outlook for capital investment, asset growth and earnings, which we are announcing today."

National Grid shares rose 1% to 940.2p at 01:51 BST.

William Ryder, an analyst at Hargreaves Lansdown, said: "National Grid's full year results showed a lower than expected impact from Covid, and the majority of this should be recoverable under existing arrangements. This sort of reliability underpins the dividend, and while a 1.2% increase is less than investors were probably used to, inflation-linked growth may not be a bad thing in the near future.

"National Grid's strategy shift towards electricity is now underway, and the next year will see further sales to transition the portfolio. The new strategy makes sense to us, but there's still execution risk."

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