This report is written to do financial analysis of National Grid Plc. (NGP) – a multinational gas and utility company headquartered in London. The entire analysis will be done using trend and ratios analysis using different groups of ratios such as profitability, efficiency, Liquidity etc. Besides these the presentation style of report will be analyzed to check the way use by company to communicate various strategies to shareholders

1. National Grid Plc
Part A:- Financial Analysis
Part B:-Corporate Communication

2. Contents
Part 1.............................................................................................................................................................3
Introduction...................................................................................................................................................3
Limitations....................................................................................................................................................3
Financial Analysis.........................................................................................................................................3
Trend Analysis..........................................................................................................................................3
Profitability Analysis ................................................................................................................................5
Liquidity Ratio Analysis...........................................................................................................................6
Capital Structure Ratio Analysis...............................................................................................................6
Ratio Analysis- Asset Efficiency..............................................................................................................7
Investor Analysis ......................................................................................................................................7
Recommendations.........................................................................................................................................8
Part B.............................................................................................................................................................8
Strategies to Communicate ..........................................................................................................................8
Performance highlighting the main achievements.......................................................................................8
Business Review to communicate Performance...........................................................................................9
Statistical Summary showing the major changes .........................................................................................9
Corporate Governance section to improve brand loyalty ..........................................................................10
Conclusion...................................................................................................................................................10
References ..................................................................................................................................................11

3. Part 1
Introduction
This report is written to do financial analysis of National Grid Plc. (NGP) – a multinational gas
and utility company headquartered in London. The entire analysis will be done using trend and
ratios analysis using different groups of ratios such as profitability, efficiency, Liquidity etc.
Besides these the presentation style of report will be analyzed to check the way use by company
to communicate various strategies to shareholders.
Limitations
The major limitations that this report might face are as follows:-
a) All analysis is done as per the data available in public domain. So, it might not give
accurate picture.
b) The financial analysis is done till 2015 which is already past 9 months so it might suffer
from some time lag.
Financial Analysis
Trend Analysis
The trend analysis will be done by analyzing the health of balance sheet in last 5 years as given
below. It clearly shows that current assets are in decreasing trend whereas fixed assets are in
increasing trend. Besides these current liabilities as well as long term liabilities are in decreasing
trend whereas shareholders equity are in increasing trend as given below:-
Balance Sheet Items (in
%) 2011 2012 2013 2014 2015
Cash & Short-Term
Investments 7.1600 5.7500 11.1500 7.5500 4.8600
Accounts Receivable 4.7700 2.0600 2.6500 3.2900 3.1200
Inventory 0.6900 0.7300 0.5200 0.4100 0.5000
Other Current Assets 1.0100 2.8400 3.1900 3.0500 2.4600
Total Current Assets

4. 13.6300 11.3800 17.5000 14.3000 10.9500
Net PP&E 68.8700 71.2000 66.8900 70.9700 73.9200
Intangibles 11.3700 11.2400 10.2700 10.0500 10.8000
Other Long-Term Assets 6.1300 6.1800 5.3400 4.6800 4.3300
Total Assets 100.0000 100.0000 100.0000 100.0000 100.0000
Accounts Payable 6.0900 3.2300 3.7100 3.7200
Short-Term Debt 6.3600 5.2200 6.3000 6.6700 5.4200
Taxes Payable 1.0400 0.4200 0.2800 0.6900
Accrued Liabilities
Other Short-Term
Liabilities 2.2500 3.2000 6.8800 3.3400 3.5600
Total Current Liabilities 14.7100 12.6800 13.6100 13.9900 13.3900
Long-Term Debt 43.6300 42.9900 45.0500 42.5500 41.2500
Other Long-Term
Liabilities 22.1300 24.8100 22.6400 20.7200 23.6500
Total Liabilities 80.4700 80.4800 81.3000 77.2600 78.2900
Total Stockholders' Equity 19.5300 19.5200 18.7000 22.7400 21.7100
Total Liabilities & Equity 100 100 100 100 100
Similarly, in case of income statement the net income as percentage of sales is in decreasing
trend due to decrease in gross margin as given below:-
Margins % of Sales 2011 2012 2013 2014 2015
Revenue 100.000 100.000 100.000 100.000 100.000
COGS 54.730 74.410 73.860 74.780 75.130
Gross Margin 45.270 25.590 26.140 25.220 24.870
SG&A 10.430
R&D

5. Other 8.730
Operating Margin 26.110 25.590 26.140 25.220 24.870
Net Int. Inc & Other -7.820 -7.090 -5.810 -6.660 -7.580
EBT Margin 18.290 18.500 20.340 18.560 17.290
Ratio Analysis
This section will do detailed ratio analysis using various classes of ratios such as profitability
ratios, efficiency ratios, Leverage ratios, liquidity ratios etc. The detailed analysis is done in
below section for NGP and JEG.
Profitability Analysis
This is a class of ratio used to determine the profitability of a company. It consists of 5 ratios as
give below. We will analyze all ratios one by one so as to make recommendations in the final
section.
Profitability Ratios 2011 2012 2013 2014 2015
Gross Margin % 45.300 25.600 26.100 25.200 24.900
Operating Margin % 26.100 25.600 26.100 25.200 24.900
Net Margin % 15.050 14.720 15.980 16.720 13.280
Asset Turnover (Average) 0.320 0.300 0.280 0.280 0.280
Return on Assets % 4.800 4.340 4.500 4.620 3.760
Return on Equity % 32.570 22.250 23.580 22.370 16.910
Ratio-Gross Margin
It basically measures the profit after reducing cost of goods sold from the revenue in percentage
of revenue. From the above table it is clear that Gross margin is in decreasing trend for NGP due
to decrease in cost of goods sold.
Net Margin
It basically measures the profit after reducing all expenses from the revenue in percentage of
revenue. From the above table it is clear that profit margin is in decreasing trend for NGP due to
increase in cost of goods sold and other operating expenses.
ROE
It is calculated as net profit divided by total equity. The analysis clearly shows that it is in
decreasing trend for NGP due to fall in net profit as explained above.

6. ROA
It is calculated as net profit divided by total assets. The analysis clearly shows that it is in
decreasing trend for NGP due to fall in net profit as explained above.
Assets Turnover
It is calculated as total sales divided by total assets. The analysis clearly shows that it is in
decreasing trend for NGP due to rise in total assets over the year. It also shows that company
assets utilization to produce revenue is in decreasing trend.
Liquidity Ratio Analysis
This is a class of ratio which are used to analyze whether current assets are sufficient to meet
current liabilities or not. The detailed analysis is given below:-
Liquidity Ratios 2011 2012 2013 2014 2015
Current Ratio 0.930 0.900 1.290 1.020 0.820
Quick Ratio 0.810 0.620 1.010 0.770 0.600
Current ratio
NGP
It is calculated as total current assets divided by total current liabilities. The analysis clearly
shows that it is in decreasing trend for NGP due to fall in a current asset which means company
has lesser cushion to meet its current liabilities.
Quick ratio
It is calculated as total current assets subtracted by inventory divided by total current liabilities.
The analysis clearly shows that it is in decreasing trend for NGP due to fall in cash components
which means company cannot meet its current liabilities from the cash it possess.
Capital Structure Ratio Analysis
It basically tells the leverage possess by the company. The detailed analysis is given below:-
Capital Structure Ratios 2011 2012 2013 2014 2015
Financial Leverage 5.120 5.120 5.350 4.400 4.610
Debt/Equity 2.230 2.220 2.410 1.880 1.910

7. D/E ratio
It is calculated as company’s debt divided by its equity. The above table clearly shows that it is
in decreasing trend which in turn decreases the risks for the company.
Financial Leverage ratio
It is calculated as company’s debt divided by its total assets. The above table clearly shows that it
is in decreasing trend which in turn decreases the risks for the company.
Ratio Analysis- Asset Efficiency
This section will do detail analysis of companies using group of assets efficiency ratio as given
below:-
Efficiency Ratios 2011 2012 2013 2014 2015
Days Sales Outstanding 57.320 41.500 28.700 36.070 38.060
Days Inventory 16.900 11.830 10.840 8.210 7.860
Payables Period 105.320 77.270 78.830 82.280 63.790
Receivables Turnover 6.370 8.800 12.720 10.120 9.590
Inventory Turnover 21.600 30.860 33.670 44.470 46.430
The analysis clearly shows that days receivables and days inventory are in decreasing trend
projecting good sign for the company. However, the bad thing is that day’s payable is also in
decreasing trend which in turn increases the cash conversion cycle.
Investor Analysis
The investor analysis will be done by analysing the stock movement in last five years as given
below. It clearly shows that it increase nearly to double fold in last five years from low of around
550 to current high of 914 showing good prospects for investors.

8. Recommendations
From the analysis it is clear that company’s profitability and liquidity ratios are in decreasing
trend which in turn making them unfavourable. However, the good thing is that it decreases its
leverage in last five years which in turn improves the company’s risks. So, the recommendation
is not to invest till company makes its profits in increasing trend.
Part B
Strategies to Communicate
Shareholders of a company must have knowledge about the company’s different strategies which
are the basis for allocating various resources. They also are supposed to know about the
problems in implementing the strategies and further organizational resources required to fulfill it.
NGP also uses many sections in its financial reports with the help of chart and graphs to discuss
and communicate its strategies and performance to various stakeholders. The detail is explained
in proceeding sections.
Performance highlighting the main achievements
In the performance highlights section NGP’s important financial along with statistical data with
the main market as well as operational events in the ongoing period is compared to the last
corresponding period, which should go with the company’s goals. This section must concentrate

9. on the company’s objectives as well as strategies during the ongoing period of its whole
lifecycle. Thus, these points should be regarded as Key Performance Indicators which help the
management to evaluate the progress of the company towards achieving its goals and prepared
strategies. Some of these strategies are included in these reports which have been included from
different company’s annual reports and reviews. The provided strategies are for example purpose
only should not be considered as an exhaustive list, because the KPIs vary from one company to
another. A snapshot of performance highlight is given below:-
Business Review to communicate Performance
NGP’s business review is used to depict the shareholders a clear understanding about the
company’s performance and position in the market. The Group of 100 has prescribed a general
guidance for the form and content of the review of financial as well as operational conditions,
which is used in this report. It has to be noted that there is no need of repetition of these
components in the review if it has been elaborately discussed previously. But, in cases where
these have been stated briefly, there these can be discussed elaborately. This is done to make
stakeholders aware about its business performance in last quarter similar to what we did in trend
analysis in Part A.
Statistical Summary showing the major changes
The financial data is also depicted in the review to make the shareholders clear about the
company’s performance in terms of financial gains and losses and to help them in taking better
decisions about the further prospects of the company. There are some companies which provide
5 years data of financial and statistical numbers in a tabular format, but it is not restricted to 5
years. A good report should include the brief income statement as well as balance sheet along

10. with the cash flow information taken directly from the audited financial reports, and the KPIs
which is termed relevant by the management. The same format is used by NGP to make
stakeholders aware about its performance in last 5 years as shown in the snapshot showing the
performance segment wise.
Corporate Governance section to improve brand loyalty
The role of the Board of Directors along with their way of working is an important part of the
section of Corporate Governance which should be conveyed to the shareholders. Various
guidelines are there to describe the corporate governance section, some of which are the ASX
Corporate Governance Council’s Corporate Governance Principles and Recommendations, the
New York Stock Exchange’s Corporate Governance Standards, the Sarbanes-Oxley Act 2002
and the Combined Code (2006) given by the UK Financial Reporting Council. NGP believed in
one or more of the above guidelines and reflected disclosures in company’s corporate
governance section. The shareholders are referred to the corporate governance section in the
annual review report of the company to meet the sectional objective of stating corporate
governance. Some of the companies also give brief details included in the annual review. This
will help the company to make connection with all the stakeholders by making them aware about
various initiatives taken by the company in fields of corporate social responsibility.
Conclusion
Shareholders of a company must have knowledge about the company’s different strategies which
are the basis for allocating various resources. They also are supposed to know about the
problems in implementing the strategies and further organizational resources required to fulfill it.
NGP uses many sections in its financial reports with the help of chart and graphs to discuss and
communicate its strategies and performance to various stakeholders. It tries to follow all the
sections as per guidelines of regulatory bodies. Some of the important sections are performance
highlights section which highlights important financial along with statistical data with the main
market as well as operational events in the ongoing period is compared to the last corresponding
period, which should go with the company’s goals. Similarly, corporate governance, business

11. review plays its role also. So, NGP are able to make connection with shareholders in correct way
through important sections.
References
Ian Giddy, Methods of Corporate valuation, New York university, 2013.
National Grid Plc Annual Report 2015, Retrieved from
http://investors.nationalgrid.com/~/media/Files/N/National-Grid-IR/reports/2015/national-grid-
plc-annual-report-and-accounts.pdf
National Grid Plc Annual Report 2014, Retrieved from
http://investors.nationalgrid.com/~/media/Files/N/National-Grid-IR/reports/2014/national-grid-
plc-annual-report-and-accounts.pdf
National Grid Income Statement 2011-2015, Retrieved from
http://financials.morningstar.com/income-statement/is.html?t=NG.&region=gbr
National Grid Balance Sheet 2011-2015, Retrieved from
http://financials.morningstar.com/balance-sheet/bs.html?t=NG.&region=gbr&culture=en-US
Tim Koller, Marc Goedhart, David Wessels,Valuation, Wiley publications, New York, Fifth
edition,2013