A costly contest for Northern

INVESTMENT COLUMN

Shareholders in Northern Electric will be cursing Professor Stephen Littlechild, the electricity regulator, for keeping it from the clutches of Trafalgar House. The shares have fallen 40 per cent against the market since the regulator stunned the sector in March by announcing a new review of electricity prices, the second within a year.

The move in effect put the kibosh on the pounds 1.2bn bid from Trafalgar, which has since unveiled such a tale of misery that there is no realistic chance of it ever mounting a further bid.

Interim figures from Northern yesterday suggest another reason for shareholders to criticise Professor Littlechild. Gross profits fell pounds 13.4m to pounds 139m in the six months to September, mainly due to the first distribution price review last year, which tightened the cap on charges. The company did well to mitigate some of the effects of the review, cutting staff costs by pounds 5.7m, but the biggest boost to slightly higher operating profits was the pounds 11.1m cut in restructuring charges. At the pre-tax level, profits slumped from pounds 63.4m to pounds 58.7m.

The pounds 2.9m costs associated with the company's "scorched earth" policy against Trafalgar - issuing a 100p-a-share special dividend and the bonus issue of preference shares - plus pounds 3.4m in higher interest charges as a result of a share buy-back more than offset gains elsewhere. Meanwhile gearing has edged up a couple of points to 26 per cent since the year- end.

It cannot be denied that the company has delivered value to shareholders. It is passing through all the benefits of the interest in the National Grid, with investors not only picking up Northern's shareholding in the Grid, but the net dividends as well, worth 4.58p in these figures.

On top of that, the company is committed to pay another special dividend - expected to be 56.5p in February 1997 - and increase the ordinary payout by 7 per cent a year until the next century.

Based on the company's forecast dividend of 39.9p for this year, the shares, unchanged yesterday at 583p, stand on a prospective yield of 8.4 per cent. That looks high for what should be a safe earnings generator and 650p would put the yield on a more realistic level.

With "clean" profits set to reach around pounds 109m this year, a forward price/earnings multiple of just 7 could tempt further bidders to enter the fray. The risks remain high, though. Gearing is set to soar to over 400 per cent by the end of the decade, if preference shares are included, and could stay high well into the next century. Still not one to chase.

News
In 2006, Pluto was reclassified as a 'dwarf planet'
scienceBut will it be reinstated?
Voices
voicesI like surprises - that's why I'm bringing them back to politics, writes Nigel Farage
Arts and Entertainment
Adam Levine plays a butcher who obsessively stalks a woman in Maroon 5's 'Animals' music video
music'Animals' video 'promotes sexual violence against women'
News
people Biographer says cinema’s enduring sex symbol led a secret troubled life
PROMOTED VIDEO
News
newsGlobal index has ranked the quality of life for OAPs - but the UK didn't even make it into the top 10
Arts and Entertainment
Anthony Horowitz will write the next 007 novel
booksAnthony Horowitz to write new instalment in spy series for 2015
News
people

Kirstie Allsopp has waded into the female fertility debate again

Sport
Kicking on: Nathaniel Clyne is relishing the challenge of the Premier League after moving from Crystal Palace
footballSurprises include a first ever call-up for one Southampton star
Voices
4 May 2013: The sun rises over Tower Bridge in London. Temperatures across the UK could be higher than several European holiday destinations by Monday, including parts of Italy and France (Andy Hepburn/PA)
voices
News
The moon observed in visible light, topography and the GRAIL gravity gradients
science

...and it wasn't caused by an asteroid crash, as first thought

News
ebooksAn unforgettable anthology of contemporary reportage
News
Researchers say a diet of fatty foods could impede smell abilities
scienceMeasuring the sense may predict a person's lifespan
Arts and Entertainment
The first batch of coach and ticket packages has sold out for next year's Glastonbury
musicIt looks like you're going to have to be quick to get tickets this year
News
peopleStella McCartney apologises over controversial Instagram picture
Extras
indybest
News
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Italian couples fake UK divorce scam on an ‘industrial scale’

Welcome to Maidenhead, the divorce capital of... Italy

A look at the the legal tourists who exploited our liberal dissolution rules
Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

The vintage series has often been criticised for racial stereotyping
An app for the amorous: Could Good2Go end disputes about sexual consent - without being a passion-killer?

An app for the amorous

Could Good2Go end disputes about sexual consent - without being a passion-killer?
Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

Llansanffraid is now Llansantffraid

Welsh town changes its name, but can you spot the difference?
Charlotte Riley: At the peak of her powers

Charlotte Riley: At the peak of her powers

After a few early missteps with Chekhov, her acting career has taken her to Hollywood. Next up is a role in the BBC’s gangster drama ‘Peaky Blinders’
She's having a laugh: Britain's female comedians have never had it so good

She's having a laugh

Britain's female comedians have never had it so good, says stand-up Natalie Haynes
Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

Let there be light

Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
Great British Bake Off, semi-final, review: Richard remains the baker to beat

Tensions rise in Bake Off's pastry week

Richard remains the baker to beat as Chetna begins to flake
Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

A look to the future

It's time travel fashion at Louis Vuitton in Paris
The 10 best bedspreads

The 10 best bedspreads

Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
Arsenal vs Galatasaray: Five things we learnt from the Emirates

Arsenal vs Galatasaray

Five things we learnt from the Gunners' Champions League victory at the Emirates
Stuart Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

This deal gives England a head-start to prepare for 2019 World Cup, says Chris Hewett
Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?