In key news on UK stocks, National Grid PLC (GB:NG) shares fell sharply after the company announced a major UK rights issue along with a mixed set of results for FY24. The company aims to generate approximately £7 billion in gross proceeds through this rights issue to fund its future investments.
Following the announcement, National Grid’s shares fell by 6% on Thursday. This could be attributed to investors’ concerns regarding the potential dilution of existing shares due to the new equity under the rights issue.
National Grid is a UK-based utility company responsible for the safe supply of gas and electricity to its customers.
More Details from NG’s Rights Issue
According to the financial markets platform Dealogic, National Grid’s latest rights issue is the biggest in the UK since 2009 and in Europe since 2021. National Grid will issue a total of 1.09 billion new shares for 645p per share, based on a ratio of seven new shares for every 24 existing shares.
The company will mainly use the funds to support the substantial increase in its capital investment of £60 billion in energy network infrastructure. This investment will be made over the next five years and is 100% higher than the amount invested in the past five years.
The increased investment is expected to deliver annual group asset growth of around 10% and an underlying EPS CAGR of 6-8% from a 2024/25 baseline.
Highlights from National Grid’s FY24 Results
For the full year, National Grid reported an underlying operating profit of £4.8 billion, reflecting an increase of 6% on a constant currency basis. This was mainly driven by revenue expansion in UK electricity transmission along with higher rates in New York and New England.
However, statutory operating profit for continuing operations declined by 8% to £4.5 billion, primarily due to non-cash exceptional charges.
Speaking of shareholder returns, the company has recommended a final dividend of 39.12p per share. This resulted in a full-year dividend of 58.52p, marking a 6% increase over FY23.
Is National Grid a Good Stock to Buy?
On TipRanks, NG stock has received a Strong Buy consensus rating based on eight Buy and two Hold recommendations. The National Grid share price target of 1,258.89p implies an upside potential of 26% on the current trading price.
