PrefInvestor wrote:Hi Matt, I wish you the best of luck with interpreting a company's accounts. I am not an accountant and I readily admit I have trouble understanding them. But if they say they are making £X million in profit I tend to believe them, lets face it presumably some independent auditor will have checked them in detail. I suspect that TRIGs corporate structure may also affect the content and structure of the accounts ?. Even though I dont fully understand the accounts I still look through them looking for potential red flags though.
These renewable companies make their money via the various agreements which govern the sale of their electricity ROCs, PPAs etc. Many of these assets have something like a ~25 year lifespan, presumably the cost of the assets need to be amortised over that period ?. In recent times all of the renewable companies have been extending the life of, in particular their solar assets. This has given rise to a few pence increase in the NAV for quite a few of the renewable ITs.
ATB
Pref
Hi PI,
I'm not dissecting TRIG (or UKWs) accounts for laughs. But less than 2 months ago a whole bunch of us got burnt by an AIM share Burford Capital (BUR). I had the ARs for the past 5-6 years or so, and they boasted very high Operating margins and Returns on Capital. And yes audited accounts. However earlier this year an analyst/lawyer called Carson Block from a hedge fund figured out their stated revenues were not backed up by reality, and he shorted the firm and SP descended from about £15 to £8 rather fast. I believe it now oscillates between £6-£8.
I'm new to investing and we had about 3.5% of our book value of our foli in BUR. So I had to cut this loss fast and we lost probably half of our investment in this firm. What this taught me was that I shouldn't have disregarded Warren Buffett's investment advice "invest in businesses that you can understand". With businesses like TRIG and UKW on the face on it, sure, their business is power generation; however what you and I invest in is the SP and dividend stream from an entity which act as a kind of interface to bunch of assets, which somewhere buried underneath are wind turbines, solar farms and a supply of £££s. After my BUR experience I'd like to know more about that. That's all. So since my position in UKW is only about 1.6% of our total foli, I'm not panicking, but I'd like to know more before I commit anymore I think.
Forgetting about TRIG. I took another look at UKW. The wording of their of their Consolidated Statement of Comprehensive Income has much artistic license. This is condensed version of AR2018s, page 45. You don't have to be an accountant to understand this:
Note use of the words "profit" and "income". However proceed to Note 4, and see the sources of that income:
So... just over half of the source of that income is "Unrealised movement in fair value of investments...". Personally I find that the usage of the word "Unrealised" makes the later usage of this figure in an EPS statement a little bit disingenuous.
Matt