Performance Analysis of Two FTSE Stocks – Drax Group Plc and National Grid Plc

Drax Group Plc

Drax Group Plc (DRX) is a Selby, the United Kingdom based electricity generation company that is engaged in the production of wood pellets from forestry residues, generation of low carbon and renewable power in the United Kingdom, as well as energy supply to Industrial and commercial to small and medium-sized business clients. The company’s flagship projects include the Drax power station, Cruachan power station, as well as two hydro-electric power stations and combined cycle gas turbines. In terms of its renewable power generation, the company has two biomass production projects which are Daldowie Fuel Plant which processes sludge from a wastewater treatment plant and converts it into wood pellets and Drax Biomass projects, which also produces wood pellets. The company is also into B2B energy supply and energy solutions to other businesses.

DRX Financial Performance

The company presented its interim results for the six months ended 30^th June 2019 on 24^th July 2019. The company reported a total revenue (including exceptional items and remeasurements) of £2232.4 million in H1 2019, an increase of 163.9 million, year on year from total revenue reported in H1 2018 at £2068.5 million. The company reported the group Adjusted EBITDA at a rise of 35 per cent year on year from £102 million in H1 2018 to £138 million in H1 2019. The company also reported an increase in the net cash from operating activities by 75.8 per cent year on year from £112 million in H1 2018 to £197 million in H1 2019. The group had total borrowings of £1169 million as on June 30, 2019. This included drawing £550 million from a £725 million facility, in part, to fund the purchase of Hydro and gas assets in the first half of the year. The company also issued $200 million of 2025 6.625 per cent USD loan notes, the proceeds from which were used to repay a £150 million of the drawn down acquisition bridge facility.

DRX Share Price Performance

On 5^th November 2019, at 09:45 A.M. GMT, while writing, Drax Group Plc’s share price was trading at GBX 297.4 per share, a decrease of 0.13 per cent or GBX 0.40 per share as compared to the previous day’s closing price, which was reported to be at GBX 297.8 per share. At the time of writing, the Drax Group Plc share price was trading 31.26 per cent below the 52-week high share price, which was at GBX 432.69 per share, set on November 13, 2018. This was also 20.02 per cent above the 52-week low price at GBX 247.8 per share, which the company’s share set on October 04, 2019. The market capitalisation (m-cap) of the Drax Group Plc’s has been reported at GBP 1.181 billion.

By the time of writing, 29,220 of the company’s shares had been traded in the market. The average volume of trading per day, for the last one year in the market, was 901,360 shares. The share has reportedly shown a negative change of 27.74 per cent in value in the last one year, from the price of GBX 411.6 per share. There also has been a negative change in the last six months in the value of Drax Group Plc’s share of about 8.99 per cent from the price of GBX 326.8. The company’s share has reportedly gained 4.05 per cent in value in the last one month from the price of GBX 285.8.

The beta of the company’s share has been reported to be at 1.3879. This implies that the movement in the company’s share is more volatile in nature, as compared to the movement of the benchmark market index.

National Grid Plc

National Grid Plc (NG.), incorporated in the year 2000, is one of the world's leading electricity and gas utility company that is engaged in transmission and distribution in both electricity and gas across the United Kingdom and the United States of America. The company’s divisions are - UK Electricity Transmission which is engaged in high voltage electricity transmission across Great Britain, UK Gas Transmission which is involved in the transmission of gas and utilities across the UK and LNG storage activities, UK Gas distribution which has almost half of the UK’s regional networks of Gas distribution system and the US Regulated, which includes Electricity transmission and distribution as well as all the Gas utility activities across New York and New England in the United States of America. At the core of the organization's working methodology is Engineering and Innovation that enables the organisation to create and execute arrangements that address probably the greatest challenges that the energy business is confronting: the fast move to sustainable sources of energy; expanding interconnectivity between countries; the advancement of savvy vitality systems; and, the electrification of transport.

Financial Performance

The company announced its full-year financial results for the year ended 31 March 2019 on 16 May 2019. The company highlighted that the underlying operating profit was down 2 per cent year on year from £3,495 million in 2018 to £3,427 million in 2019. The company also reported that the Statutory operating profit witnessed a decline of 18 per cent year on year from £3,493 million in 2018 to £2,870 million in 2018. This was a consequence of a lower share count. The company reported an underlying Profit Before Tax (PBT) at £2,474 million, a decrease of 3 per cent year on year from PBT at £2,538 million in 2018. The Underlying Earnings per Share (uEPS) was reported at an increase of 5 per cent year on year from £56.2 million in 2018 to uEPS £58.9 million in the year 2019. The company also reported that there was a capital investment of £4.5 billion which led to a robust Asset growth at 7 per cent. The company also reported having maintained a strong Return on Equity (RoE) at 11.8 per cent for the group which had an advantage from the receipt of the US legal settlement income but was lower by 50 Basis points compared to the previous year’s RoE at 12.3 per cent. Year on year, the Value-added displayed a jump of 3 per cent from £2,004 million in 2018 to £2,071 million in 2019. The board recommended a full-year dividend of GBX 47.34 per share, a jump of 3 per cent from 2018's declared revenue at GBX 45.93 per share. This was in line with the company’s policy and was covered 1.2 times by the underlying Earnings per share.

Latest News

On 20th September 2019, the company reported that it had planned to host an investor teach-in for the purpose of providing an understanding of its US regulated businesses. The objective of the teach-in was to highlight the robust rise in its US operations, where, the asset growth is anticipated to be above 8 per cent. The focus of the event was on two aspects, the United States Energy Industry needing significant levels of investment to modernise ageing networks and the decarbonisation of energy and growth in the renewable energy sector in the US. The company also reported that no material updates would be provided on current trading activity.

Share Price Performance

On 5^th November 2019, at 09:55 A.M. GMT, while writing, National Grid Plc’s share price was trading at GBX 896.98 per share, flatlined with a slight change of 0.002 per cent or GBX 0.02 per share as compared to the previous day’s closing price, which was reported to be at GBX 897.00 per share. At the time of writing, the National Grid Plc share price was trading 3.21 per cent below the 52-week high share price, which was at GBX 926.7 per share, set on October 24, 2019. This was also 58.23 per cent above the 52-week low price at GBX 744.5 per share, which the company’s share set on December 27, 2018. The market capitalisation (m-cap) of the National Grid Plc has been reported at GBP 31.221 billion.

By the time of writing, 289,960 of the company’s shares had been traded in the market. The average volume of trading per day, for the last one year in the market, was 5.01 million shares. The share has reportedly shown a positive change of 7.32 per cent in value in the last one year, from the price of GBX 835.8 per share. There also has been a positive change in the last six months in the value of National Grid Plc’s share of about 8.18 per cent from the price of GBX 829.1. The company’s share has also reportedly gained 3.08 per cent in value in the last one month from the price of GBX 870.1.

The beta of the company’s share has been reported to be at 0.6935. This implies that the movement in the company’s share is less volatile in nature, as compared to the movement of the benchmark market index.