National Grid plc (National Grid) is an international electric and gas company and also is one of the largest investor owned Energy Company in the world. It is listed on the London Stock Exchange (LSE: NG) and New York Stock Exchange (NYSE:NGG). Primary areas of operations are the ownership and operation of regulated electricity and gas infrastructure network in UK and the US, serving more than 19 million consumers in a direct or indirect way. In UK the company owns the high voltage electricity transmission network, high pressure gas transmission system and also operates in related markets which include electricity interconnectors, metering services, Liquefied Natural Gas (LNG) facilities, LNG storage and transportation and land remediation. The company in US owns over 4,000 MW of contracted electricity generation along with non-regulated gas transmission pipelines. National grid is headquartered in London, UK. The Company have more than 27,500 employees located in the UK and the US. The Business Model is divided into 4 key areas: Transmission Electricity Distribution & Generation Gas Distribution Non-regulated Businesses
The transmission of electricity and gas in the UK as owner and operator of high voltage electricity transmission network in England and Wales, the gas national transmission system in Great Britain, the electricity inter connector with France and storage facilities for LNG .Operator of electricity transmission networks in Scotland.
Operating profit margin ratio analysis measures a company’s operating efficiency and pricing efficiency with its successful cost controlling. The higher the ratio, the better a company is. A higher operating profit margin means that a company has lower fixed cost and a better gross margin or increasing sales faster than costs, which gives management more flexibility in determining prices. It also provides useful information for investors to determine the quality of a company when looking at the trend in operating margin over time and to compare with industry peers. Usually, it serves more as a general measurement than a concrete value. The objective of margin analysis is to detect consistency or positive/negative trends in a company’s earnings. Positive profit margin analysis translates into positive investment quality. To a large degree, it is the quality, and growth, of a company’s earnings that drive its stock price. Financial statement in this operating profit margin, in the year of 31 march 2010 was 23.5% and in the year of 2009 it was 16.78%. The total OP of the income statement was 3293£ in 2010 and 13064 in 2009 so the OP is best in the when comparing with 2009.
A climbing return on assets usually indicates a climbing stock price, because it tells investors that a management is skilled at generating profits from the resources that a business owns The business activities carried out by National Grid’s power and distribution network are nearly 95% regulated, their revenues and cash flow are almost predictable and the group henceforth do not find themselves into troubled water of fluctuating prices. Henceforth the financing position is only the most likely cause of its weakness. For the year 2008-09 the net debt rose by 29% to almost £23bn, which reflects large currency movements which follows the acquisition of US business Keyspan in 2007 for £3.8 bn. There is also a twist in the tale as the appreciation of dollar may have increased the sterling value of National Grid’s net debt by £4bn, but in return it has also increased the sterling value of US assets by £4.5 bn. To add more, National Grid’s business model is very robust and thus it can support such high amount of debts. The annual investment of £3bn is typically funded half by cash and half by debt, resulting that debts are always increasing constantly, but then the asset base also grows at the same time. National Grid’s US subsidiaries have requested to their own regulators requesting for higher authorised returns. If it would be allowed, than it would improve earnings and cash flow in the future. The Grid is very confident in sticking to its policy of increasing the dividend by 8 percent every year till 2012.But there are two small caveats – first of all the share buyback programme has been suspended to save costs, and secondly, investors are being offered the option of taking payment as scrip dividend.
In the year 2008 the company earnings per share was 122.3p and in the year 2009 it was 38.5p in the year 2009 the share the company earnings per share value is get down to 47% of share value this was due to recession. In the year 2010 the company earnings per share is 56.1p. so on the average of the value is 21.5% has increased. The cost of sales in the year 2009 was 8,534 and in the year 2010 it was 10,714 so the profit after the taxation the company profit was 1,386 in 2010 and 947 in 2009. The National Grid is clearly on the right path after looking at the ratios calculated. These ratios are not the actual mirror to the performance of the company but it shows the trend where it might head into the future taking into considerations the competitive market and fluctuating market conditions.
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